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Suppose that Halcyon Capital, a venture capital firm, raised $250 million of committed capital. Each year...

Suppose that Halcyon Capital, a venture capital firm, raised $250 million of committed capital. Each year over the 10-year life of the fund, 2% of this committed capital will be used to pay Halcyon's management fee. As is typical in the venture capital industry, Halcyon will only invest $200 million (committed capital less lifetime management fees). At the end of 10 years, the investments made by the fund are worth $800 million. Halcyon also charges 20% carried interest on the profits of the fund (net of management fees). Assume that Halcyon collects the $250 million of committed capital and invests $200 million of it immediately. Also assume that Halcyon collects all proceeds from its investments at the end of the ten-year life.

The IRR on the investments made by Halcyon Capital is closest to ______%.
  • A. 14.9
  • B. 12.4
  • C. 9.9
  • D. 15.8
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