Banks are financing acquisition projects, i.e. for Venture Capital funds. An exemplary project shows the following data: A VC fund purchased the target company on 1.1.2020 for a price of 300k at a Price/EBIT-multiple of 7.5x. 40% of the purchase price is funded by equity of the VC, remaining amount by bank loan at an interest of 10% p.a., collateralized by the shares of the target company. The loan will be repaid on 31.12.2023, accrual for loan repayment is planned pro rata annually. All cash flows related to the purchase will be pushed down into the target companys P&L. The target company runs operationally at annual revenues of 150k in 2020, growing each upcoming year at 4%, while operational costs in 2020 are at -110k at a future growth rate of 2% year-on- year. In 2020, EBIT is 40k. Operational interest is at -6.0k (and will be stable for the upcoming years). Tax rate is 30%. There are no other operational P/L impacts. The VC plans to sell the company on 31.12.2025 (= after 6 years) at a Price/EBIT-multiple of 7.5x which was the same at purchase. Please complete the financial model of the transaction based on the xls-table below. In case of lack of data, please take a reasonable assumption for your subsequent calculation. Please calculate the planned annual profitability of the VC fund and the overall internal rate of return. As the financing bank, what is your recommendation in respect to the transaction and its risks and benefits?

Transaction data Purchase price 300 Equity 120 Dept capital 180 Term debt 4 years bullit repayment Annual debt accrual 45,0 Interest rate 10,0% Tax rate 30% Target company 2020 2021 2022 2023 2024 2025 Revenues 150,0 Costs operational -110,0 EBIT 40,0 Interest operational -6,0 Taxes -10,2 PBT 23,8