Question 2

You are an early-stage venture capitalist conducting due diligence on a biotech start-up. You are willing to contribute $1,500,000 in the first round of financing, and you target a final exit multiple of 12 invested capital, which estimate will happen in ten years. At that time, you estimate the firm will sell for $80,000,000. You expect an additional round of financing in four years in which you will not participate that will dilute your ownership share by 50%. What final equity position (weight) must you require for your investment? Multiple Choice 1.80% 26.79% 19.00% 15.40% 22.50% An LBO purchases a business for $160,000,000,70% of which is debt. In 6 years, the LBO sells it for $325,000,000. If the debt principal remains the same, what is the internal rate of return (IRR) of this investment? Multiple Choice 15.75% 25.00% 28.19% 20.00% 103.13%