22. (This is a little bit tricky.) Suppose that a S1000M VC fund has fees of 2.0

Question

22. (This is a little bit tricky.) Suppose that a S1000M VC fund has fees of 2.0 percent per year in all years, with these fees paid on committed capital in the first five years and on net invested capital for years 6 through 10. You can assume the fund is fully invested by the beginning of year 6, and then realizes 20 percent of its inyestment capital in each of the following five years. What are the lifetime fees and investment capital for this fund? (Make assumptions for any information that you think is still missing from the problem.). Show your work.

Explanation / Answer

Year Committed/Invested capital 2%*Comm./Inv. Capital 1 1000 20 2 1000 20 3 1000 20 4 1000 20 5 1000 20 6 1000-(20%*1000)= 800 16 7 800-(20%*800)= 640 12.8 8 640-(20%*640) 512 10.24 9 512-(20%*512)= 409.6 8.19 10 327.68 6.55 Lifetime Fees 153.79 Investment capital 1000-153.79= 846.21

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