Use the Following Information to Answer the Question(s) Below

question 48

Multiple Choice

Use the following information to answer the question(s) below.

Suppose that Galt Ventures, a venture capital firm, raised $250 million of committed capital. Each year over the 10-year life of the fund, 2% of this committed capital will be used to pay Galt's management fee. As is typical in the venture capital industry, Galt will only invest $200 million (committed capital less lifetime management fees) . At the end of 10 years, the investments made by the fund are worth $800 million. Galt also charges 20% carried interest on the profits of the fund (net of management fees) . Assume that Galt collects the $250 million of committed capital and invests $200 million of it immediately. Also assume that Galt collects all proceeds from its investments at the end of the ten-year life.

-The IRR on the investment of a limited partner into Galt Ventures net of all management fees and expenses is closest to:

• A)7.8%.
• B)9.9%.
• C)12.4%.
• D)14.9%.

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Definitions:

Mainframe Computers

Powerful computers used primarily by large organizations for critical applications, bulk data processing, and enterprise resource management.

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Electronic devices that are used by individuals for performing a wide range of tasks including but not limited to processing information, gaming, and accessing the internet.

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