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13. What is the paid-in capital for 2009?

14. What are the management fees for 2009?

15. In whar year is carried interest first paid?

16. What is the NAV before distributions for 2009?

17. Whar is the carried interest for 2009?

18. What is the NAV after distributions for 2009?

19. What is the DPI after 2009?

20. What is the RVPI after 2009?

21. What is the TVPI after 2009?

Use the following information to answer Questions 22 through 26.

The venture capital firm's founders believe they can sell the firm for $50 million in four years. They need $7 million in capital now and the entrepreneurs wish to hold 1 million shares. The private equity firm decides that given the high risk of this firm, a discount rate of 45% is appropriate. Use the NPV venture capital method assuming a single financing round.

22. What is the post-money valuation?

23. What is the pre-money valuation?

24. What is the ownership fraction for the private equity firm?

25. What is the number of shares for the private equity firm?

26. What is the stock price per share?

Use the following information to answer Questions 27 through 32.

A firm's founders believe that their firm can be sold for $60 million in four years. The firm needs $6 million in capital now and $3 million in three years. The entrepreneurs want to hold I million shares. The private equity firm uses a discount rate of 50% over all four years.

27. What is the post-money valuation at the rime of second round financing?

28. What is the post-money valuation at the time of first round financing?

29. What is the required fractional ownership for the second round investors?

30. What is the fractional ownership for the first round investors, after dilution by the second round investors?

31. What is the stock price per share after the first round of financing?

32. What is the stock price per share after the second round of financing*

Use the following information to answer Questions 33 through 36.

The venture capital firm's founders believe they can sell the firm for $70 million in five years. They need $9 million in capital now, and the entrepreneurs wish to hold 1 million shares. The private equity investor requires a return of 35%. Use the IRR venture capital method, assuming a single financing round.

33. What is the investor's ownership fraction?

34. What is the stock price per share?

35. What is the post-money valuation?

36. What is the pre-money valuation?

37. A private equity investor has a discount rare of 30%. The investor believes, however, that the entrepreneurs projection of the company's success is overly optimistic and that the chance of the company failing in a given year is 20%. What is the discount rate that factors in the company's probability of failure?

38. Given the following figures for an LBO, what is the cash flow?

Net Income 20.0

Depreciation 5.2

Amortization of Deferred Charges 1.3

Reinvested Depreciation 5.2

New Capital Expenditures 2.1

Increase in NWC 1.7

39. Which of the following best describes the cash sweep in an LBO? Cash sweep is the:

A. cash flow used to pay down debt in an LBO.

B. amount of the investment returned to the private equity firm each year.

C. cash used by portfolio company managers on perquisites for themselves.

40. Which of the following best describes how a private equity fund receives most of its return in an LBO? The return is derived from the:

A. terminal value of the LBO.

B. cash dividends over the life of the LBO.

C. terminal value of the LBO and the cash dividends over the life of the LBO.

4 I. The terminal value of the LBO fund equity stake is $274 million in five years. The initial investments from senior debt, junior debt, and management equity are $52, $84, and $7, respectively. Transactions costs at initiation of the LBO were $9 million. If the target IRR is 40%, what is the Enterprise Value of the firm at year 0?

42. The terminal value of the equity stake in an LBO is $200 million in five years. The risk-free rates, market risk premiums, enterprise beta, senior debc, and junior debt values are provided for the life of the LBO investment in the table below.

Year

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