(Back info for Question 13)

Question 12. What role does gold potentially play in a portfolio? Assume you are asked to value a non-traded gold and other natural resources hedge fund available ONLY to accredited investors. Who are accredited investors and what approach to valuation would you take? Why? (i.e. this hedge fund is not publicly traded)

13. Consider the same private equity fund as in question 12. You are to assume the initial private equity investors want to maintain 1 million shares but are offering 2 million shares to outside accredited investors. The private equity fund is asking the outside investors to provide $2 Million in capital at time 1 and is promising them S5 million as a payout at time 3. Now before the outside investors invest (if they do), the private equity fund is worth 12 million and there are 3 million shares outstanding all held by the original equity investors. Depict and discuss how you would value this opportunity for the external investors as their financial consultant? Use your knowledge of finance. Build a model. What price should the outside investors be willing to pay for each of the 2 million shares (assuming all are subscribed)? You do not actually have enough numerical information to value this. So simply build the model and tell the investors what they need to consider. NOTE this is NOT an IPO the private equity fund will remain private