Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A VC firm is considering two different structures for its new $250M fund. Both structures would have management fees of 2 percent per year (on

A VC firm is considering two different structures for its new $250M fund. Both structures would have management fees of 2 percent per year (on committed capital) for all 10 years. Under Structure I, the fund would receive an X percent carry with a basis of all committed capital. Under Structure II, the fund would receive a Y percent carry with a basis of all investment capital. For a given amount of (total) exit proceeds = $Z, solve for the amount of carried interest under both structures. Carried Interest Under Structure 1 = X% * (z - 250) Carried Interest Under Structure 2 = Y% * (z - 250 - (250*2%*10) Carried Interest Under Structure 2 = Y% * (z - 200) Using the Hint, solve the following question.

A VC firm is considering two different structures for its new $250M fund. Both structures would have management fees of 2 percent per year (on committed capital) for all 10 years. Under Structure I, the fund would receive and 20 percent carry with a basis of all committed capital. Under Structure II, the fund would receive a 30 percent carry with a basis of all investment capital. For a given amount of (total) exit proceeds = $500M, solve for the amount of carried interest under both structures. a. How much is the carry amount under each structure? How much is distributed to LPs under each structure? b. For what amount of exit proceeds would these two structures yield the same amount of carried interest?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions Management

Authors: Anthony Saunders, Marcia Cornett

8th Edition

0078034809, 978-0078034800

More Books

Students also viewed these Finance questions

Question

The waterfall model is the best model for SDLC

Answered: 1 week ago

Question

Differentiate tan(7x+9x-2.5)

Answered: 1 week ago

Question

Explain the sources of recruitment.

Answered: 1 week ago

Question

Differentiate sin(5x+2)

Answered: 1 week ago

Question

Compute the derivative f(x)=1/ax+bx

Answered: 1 week ago

Question

Identify cultural barriers to communication.

Answered: 1 week ago