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What is the breakeven amount of total distributions

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Question - A VC firm is considering two different structures for its new $300M fund. Both structures would have management fees of 2 percent per year (on committed capital) for all 10 years. Under Structure 1, the fund would receive a 25 percent carry with a basis of all committed capital. Under Structure 2, the fund would receive a 20 percent carry with a basis of all investment capital. Suppose total cumulative distributions for 10 years = $400 million. What is the breakeven amount of total distributions that makes GP indifferent between structure (1) and (2)?

A. $400 million

B. $450 million

C. $500 million

D. $540 million

E. None of the above

Reference no: EM132906004

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