Course Name: Small Business Financing

Course Code: FIN 421

Q1: Pricing and exit strategy are the main instruments used by Private Equity; explain how do PE implement them on developing countries and whether there are some difficulties they face on pricing & exit strategy? What kind of exit strategy do you think is common? (2points)

Q1: Assume an insurance company invest in different Venture Capitalist and has these Cash flows as follow on the table (3 points)

2015

2016

2017

2018

2019

2020

2021

2022

2023

IRR

A

-200 million SAR

50 million SAR

0 SAR

60 million SAR

-40 million SAR

100 million SAR

0

90 million SAR

80 million SAR

B

-100 million SAR

0

0

0

-50 million SAR

0

0

-25 million SAR

400 million SAR

C

-300 million SAR

50 million SAR

10 million SAR

0

-50 million SAR

200 million SAR

50 million SAR

0

50 million SAR

D

-50 million SAR

10 million SAR

10 million SAR

10 million SAR

10 million SAR

10 million SAR

10 million SAR

10 million SAR

10 million SAR

Pooled

A, B, C, D are different VC this insurance company invest in.

a- Calculate each venture capitalist’s IRR.

b- Calculate Average IRR.

c- Calculate pooled cash flow and its IRR

d- Analyze B and D based on what you see on their CF and IRR.