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Assume that a VC fund invests in 20 companies with a $400 million fund. Each...

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Finance

Assume that a VC fund invests in 20 companies with a $400 million fund. Each company receives $20 million over the life of the fund for 50% of ownership in these companies. The general partners will only be able to harvest 25% of the investments with an average 5x return. How much does the venture capital fund return to its limited partners if there is a split of 99% to limited partners and 1% to venture capitalists until the initial capital is returned ($400 million), and 80% to limited partners and 20% to venture capitalists (carried interest) on the remaining return?

Select one:

a. $400 million initial capital + $77 million profits

b. $400 million initial capital + $19 million profits

c. $500 million + $400 million

d. $400 million

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