Michael and Amanda next discuss DEP’s investment in ALPHA Holdings, a private equity fund. Selected details on the ALPHA Holdings fund include the following:

Total committed capital: 130 Mio. €
Carried interest to GP: 0.18
Distribution = american waterfall
Profits of the first fund investment: 26.2 Mio. €
Most recent cumulative paid-in capital: 88 Mio. €
Most recent cumulative distributions paid out to LPs: 20 Mio. €
Most recent NAV before distributions: 156.66 Mio. €
Most recent NAV after distributions: 129.85 Mio. €
Estimated NAV before distribution at the end of next year: 300 Mio. €

What is the expected total carried interest from ALPHA Holdings based on next year's estimated NAV?
Question 60Answer

a.
None of the given options is correct.

b.
117.54

c.
25.80

d.
30.63

To determine the expected total carried interest from ALPHA Holdings based on next year's estimated NAV, we need to follow these steps:

1. **Calculate the expected total value of the fund next year:**
   - The estimated NAV before distribution at the end of next year is 300 Mio. €
   - Adding the cumulative distributions paid out to LPs: 20 Mio. €
   - Total value = Estimated NAV next year + Cumulative distributions
   - Total value = 300 Mio. € + 20 Mio. € = 320 Mio. €

2. **Calculate the profits:**
   - Paid-In Capital (PIC) = 88 Mio. €
   - Profits = Total value - Paid-In Capital
   - Profits = 320 Mio. € - 88 Mio. € = 232 Mio. €

3. **Calculate the carried interest:**
   - Carried interest rate = 0.18
   - Carried interest = Carried interest rate * Profits
   - Carried interest = 0.18 * 232 Mio. € = 41.76 Mio. €

Thus, the expected total carried interest from ALPHA Holdings based on next year's estimated NAV is:

**41.76 Mio. €**

Given the options:
a. None of the given options is correct.
b. 117.54
c. 25.80
d. 30.63

None of the given options is correct.

Would you like more details or have any questions?

Here are 5 questions you might want to ask next:
1. How does carried interest impact the overall returns for LPs in a private equity fund?
2. What are the main differences between American and European waterfall models in private equity?
3. How is the hurdle rate applied in private equity carried interest calculations?
4. What is the significance of total committed capital in evaluating a private equity fund's potential?
5. How do changes in NAV affect the carried interest and overall returns of a private equity fund?

**Tip:** Understanding carried interest calculations is crucial for both general partners and limited partners in private equity, as it directly affects the incentive structure and alignment of interests between them.

Learn how to calculate expected carried interest from ALPHA Holdings based on next year's estimated NAV. Understand the impact of NAV calculations and distribution methods in private equity funds.

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