Uncommon Brian Carlson Would Need Case Study

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The IRR of these flows is 19%, given he is only putting up the $8.325 million from his equity holding.

E. For their investment, the Series A investors will receive a total of $11.9325 million, for a $7 million investment on 1/1/04. The Series B. investors will receive a total of $5.55 million for their investment of $3 million on 1/1/08. The spreadsheet to calculate the XIRR of these owners is as follows:

XIRR

1/1/2004

1/1/2008

12/31/2009

Class A

9.29%

-7,000,000

0

11,932,500

Class B

36.01%

0

-3,000,000

5,550,000

The Class B shareholders have a higher IRR because they were able to buy in at a relatively low price, and cash out quickly.

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The Class A shareholders needed to wait longer to cash out, which accounts for the lower IRR.

F. Under this scenario, the management team would receive the full $60 million, which gives them an IRR of:

XIRR

12/31/2009

12/31/2014

64.33%

(5,000,000)

60,000,000

G. Under this scenario, the value of the sale would be reduced from $60million to $40 million after the LBO group's debt is paid out from the proceeds of the sale. The warrant exercise is worth 1.9 million common shares. When the LBO occurred, there were 2 million shares outstanding. This would therefore dilute that so that the LBO group would hold.....

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