BADM 634 INVESTINTG IN NEW VENTURES QUIZ 1 (closed book and note, and phone and other devices, open mind) (CHAPTER COVERAGE: chapters 1-2 ) Question 1. Victoria Ventures has raised their $800M fund, Victoria Ventures , with terms as given in Appendix 2

BADM 634 INVESTINTG IN NEW VENTURES

QUIZ 1 (closed book and note, and phone and other devices, open mind)

(CHAPTER COVERAGE: chapters 1-2 )

Question 1.

Victoria Ventures has raised their $800M fund, Victoria Ventures , with terms as given in

Appendix 2.C of the Metrick and Yasuda (2nd ed. , 2009). The management fees given in this

appendix are as follows.

Management Fees: All management fees are computed based on committed capital.

These fees are 2 percent in years 1 and 2, 2.25 percent in years 3 and 4, 2 percent in year 5,

1.75 percent in year 6, 1.50 percent in year 7, 1.25 percent in year 8, 1 percent in year 9, and

0.75 percent in year 10 through 15. These fees will be paid quarterly, with equal installments

within each year.

Given the information as mentioned above, what are the lifetime fees and investment capital for

this fund?

(Please show your detailed calculations on the file that you will upload)

Question 2

A VC firm is considering two different structures for its new $300M fund. Both structures

would have management fees of 2.5 percent per year (on committed capital) for all 12 years.

Under Structure I, the fund would receive a 25 percent carry with a basis of all committed

capital. Under Structure II, the fund would receive a 20 percent carry with a basis of all

investment capital.

Problems

(a) Suppose that total exit proceeds from all investments are $150M over the entire life of

the fund. How much carried interest would be earned under each of these two structures?

(b) For what amount of exit proceeds would these two structures yield the same amount of

carried interest? (show your calculations. Use additional pages if necessary)

(Please show your detailed calculations)