A growth equity fund makes a $20 million investment in XYZ firm and, in return, gets 4 million shares of stock. After the transaction, the XYZ has 12 million shares outstanding, $10 million of debt and $4 million of cash. XYZ had an EBITDA of $5 million in the 12 months prior to funding.

Assume that at the end of 4 years, the EBITDA of the company is $20 million, and the debt has been reduced to zero and the company has cash on hand of $10 million. No distributions were made to the shareholders during interim periods. The company is sold for a multiple 25% higher than used to value the company when the growth equity fund invested. There is a 3% (of TEV) sale related fee expense paid directly by the company, but no other fees or expenses associated

with the transaction.

Please answer the following:

a. What was the pre money equity valuation placed on XYZ when the fund invested?

b. What was the post money equity valuation of XYZ's?

c. What is the post-money TEV/EBITDA multiple ascribed to XYZ during the funding round?

d. How much does the growth equity Fund receive of the cash distributed upon sale?

e. How much does the entrepreneur receive upon sale if he is the only other equity owner?

f. What is the fund's gross IRR for this investment?

g. Now assume a dividend to all shareholders of $20 million (split pro-rata based on ownership) was received at the end of year 2. How would be the fund's gross IRR for this investment?

Note: This question is the same as what we went over in class, but for net debt is not zero at close or at exit. As a result, you need to do the additional calculation