EBV is considering a $6M Series A investment in Newco. EBV proposes to structure the investment as 5M shares of convertible preferred stock. The founder and employees of Newco have claims on 10M shares of common stock. Thus, following the Series A investment, Newco will have 10M common shares outstanding and would have 15M shares outstanding on conversion of the CP. EBV estimates a 30 percent probability for a successful exit, with an expected exit time in 5 years and an exit valuation of $300M. The $100M EBV fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits. Assume the following: The cost of venture capital is 10%; Expected GVM =2.5; expected retention for first round investors is 50%. GP% = 10%.

What is the target return of the money?

Group of answer choices

15.7%

39.95

46.5%

How much is the lifetime management fee?

Group of answer choices

$20M

$10M

$30M

Will GPs recommend the Investment following Standard VC method?

Group of answer choices

Yes, since the Partial Valuation ($M) =$9.65M which is higher than required investment of $6M.

No, since the Partial Valuation ($M) =$9.65M which is higher than required investment of $6M.

Yes, since the Partial Valuation ($M) =$7.76M which is higher than required investment of $6M.

No, since the Partial Valuation ($M) =$5.46M which is lower than required investment of $6M.