A VC firm is considering two different structures for its new $100M fund. Both structures would have management fees of 2.5 percent per year (on committed capital) for all ten 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. For what amount of exit proceeds would these two structures yield the same amount of carried interest?
A VC firm is considering two different structures for its new $100M fund. Both structures would have management fees of 2.5 percent per year (on committed capital) for all ten 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. For what amount of exit proceeds would these two structures yield the same amount of carried interest?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A VC firm is considering two different structures for its new $100M fund. Both structures would have management fees of 2.5 percent per year (on committed capital) for all ten 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. For what amount of exit proceeds would these two structures yield the same amount of carried interest?
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