Schweser Mock Vol 2 Exam 2 PM Q101

CFA Level II Alternative Investments
#1

Regarding Q101 Schweser Vol. 2 Exam 2 PM.

I thought this was a straight forward VC question. I saw that there was a “possible 15% rate of failure for the company” and thus adjusted the DR accordingly to reflect this (ie 1+.4/1-.15 = 64.7% DR).

However the answer did not make this adjustment and used just 40%. Does anyone know why this was the case? What should we do in the exam?

Answer was given as:

post-money valuation = V/(1 + r)t

V = $300 million; r = 40%; t = 5 years

post-money valuation = 300 millions/(1 + 0.4)5 = 55.78 million

#2
  • p.123
    • (Original) After a through analysis of Targus’s future prospects, Alpha Fund’s management believes that there is a possible 15% risk of failure for the company.
    • (Correct) should be deleted
#3

Ahh ok, Is that from an errata, i checked the online one and could not see anything for book 2?

Thanks for your help!