A private equity fund invests $100 million in a venture company that is sold for $130 million. It also invests $100 million in an LBO that goes poorly and is liquidated for $80 million. 1. If the carried interest incentive fee for the GP is 20% and there is no clawback provision, what is the investor's return after incentive fees, assuming the investment outcomes are realized in the same year: a under an American-style (deal-by-deal) waterfall structure? b. under a European-style (whole-of-fund) waterfall structure?

A private equity fund invests $100 million in a venture company that is sold for $130 million. It also invests $100 million in an LBO that goes poorly and is liquidated for $80 million. 1. If the carried interest incentive fee for the GP is 20% and there is no clawback provision, what is the investor's return after incentive fees, assuming the investment outcomes are realized in the same year: a under an American-style (deal-by-deal) waterfall structure? b. under a European-style (whole-of-fund) waterfall structure?

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter11: Venture Capital Valuation Methods

Section: Chapter Questions

Problem 5EP

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