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LOS l: Calculate pre-money valuation, post-money valuation, ownership fraction, and price per share applying the venture capital method in terms of IRR.
Q1. A private equity firm makes a $10 million investment in a portfolio company and calculates that the firm’s investors should hold 1,000,000 shares at a price of $15.00 per share using the IRR approach. The founders of a portfolio company currently hold 300,000 shares. The appropriate post-money (POST) valuation is:
A) $19.5 million.
B) $15 million.
C) $13 million.
Q2. The primary difference between the venture capital method using the IRR and NPV approach is that:
A) the IRR approach starts by calculating the investor’s expected future wealth.
B) the IRR method does not use exit values.
C) the NPV approach does not require fractional ownership calculations.
Q3. The Milat Private Equity Fund (Milat) makes a $35 million investment in a promising venture capital firm. Milat expects the venture capital firm could be sold in four years for $150 million and determines that the appropriate IRR rate is 40%. The founders of the venture capital firm currently hold 1 million shares. Milat’s fractional ownership in the firm and the appropriate share price, respectively, is closest to:
Fractional ownership Share price
A) 89.64% $4.05
B) 23.33% $115.00
C) 89.64% $3.63 | 
发表于 2009-3-10 13:09
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