Private Equity & Exit Opps
MIP dilution math: sponsor invests $400 for 100% of the equity and grants management options over 10% of the equity VALUE GAIN above the $400 entry value. Exit equity is $1,000 in year 5. Sponsor returns with and without the MIP?
Model answer
Value gain above strike = 1,000 − 400 = $600. Management's MIP payout = 10% × 600 = $60. Sponsor proceeds = 1,000 − 60 = $940. Sponsor MOIC = 940/400 = 2.35x (~19% IRR) versus 1,000/400 = 2.5x (~20%)…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 2,300+ — or go Pro for unlimited reps.
Pro unlocks every model answer — $19.99/mo.
More from Private Equity & Exit Opps
- At a high level, how does private equity recruiting differ from investment banking recruiting?
- What's the difference between on-cycle and off-cycle PE recruiting?
- Should an IB analyst go on-cycle or wait for off-cycle? What are the real trade-offs?
- What role do headhunters actually play in PE recruiting, and why are they called gatekeepers?
- How should you prepare for and handle the headhunter intro call?
- What should you tell headhunters about your fund preferences — and why does consistency matter so much?
Try the real thing
1 / 3Accounting & the 3 Statements
What are the three financial statements and what does each show?
Superday coming up? Take the cheat sheet.
The technicals and stories to have cold before you walk in — free, one email, no mailing list.
Free tier: 20 cards + 10 daily reps + ALL drills — no credit card required.