ECONOMICS 1122- Sunny Bird Ventures is considering two alternative carry
Question # 00464211
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Updated on: 01/16/2017 11:14 PM Due on: 01/17/2017
3. Sunny Bird Ventures is considering two alternative carry structures for its SBV II. Structure 1: allows for 25% carry with a basis of all committed capital. Structure 2: allows for 20% carry with a basis of all investment capital. Committed capital is $ 250 M. Management fees are 2.5% of committed capital every year of fund duration of 10 years. Suppose total cumulative distributions for 10 years is $400 M.
a) How much carry would GP get under 1 and 2?
b) What is the breakeven amount of distributions that makes GP indifferent between structure (1) and (2)?
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Solution: ECONOMICS 1122- Sunny Bird Ventures is considering two alternative carry