如题

问题如下：

Q. Demonstrate whether Estragon can reasonably improve its failure rate to increase its overall rate of return to 35%.

选项：

解释：

Assuming an initial investment of EUR100, we would need to solve for the unknown failure rate to achieve an IRR of 35%. The unknown terminal value in five years may be expressed as follows: (= (EUR100 − EURX) × 15) and we use an IRR of 35% in the denominator, as shown below.

EUR100= X(1+0.35)5$\text{EUR}100=\frac{X}{{\left(1+0.35\right)}^5}$

Solving for X in the equation above gives a result of 448.4 (= 100(1.35)⁵). Substituting 448.4 into the following and solving for x gives a result of 70.1:

448.4 = (100 −x) × 15.

Thus, the failure rate would have to improve to 70% (from its previous level of 75%).

Applying the 100/10/1 rule of thumb and the failure rates above to Estragon’s situation with 20 portfolio companies implies that currently five of these (i.e., (= 1 − 0.75) × 20) are the drivers of Estragon’s returns. If Estragon could improve its process to improve its portfolio to six successful companies (i.e., (= 1 − 0.70) × 20), then it could improve its IRR to 35%. NOTE: A simpler way to estimate this would be to note that the hoped-for IRR is 16.67% better than current (= (35 − 30) ÷ 30), so a 20% (= (6-5) ÷ 5) improvement in the number of successful firms in the portfolio would accomplish this if the additional successful firm can generate the 15× return.