In the PE example, what is the Exit Equity value after the IPO?

In the PE example, what is the Exit Equity value after the IPO?

• A. 800
• B. 1200
• C. 2400
• D. 3200

Answer: (C)

The key idea is that exit equity value is the PE’s share of the company’s equity value after the IPO. After an IPO, the company has a market value (post-IPO equity value), and the PE’s portion of that value is determined by how much equity they own. So you multiply the ownership percentage the PE holds after the IPO by the post-IPO equity value. If the post-IPO equity value is 4,000 and the PE owns 60% after the IPO, the exit equity value is 0.60 × 4,000 = 2,400. That matches the given correct choice. The other numbers would require different post-IPO values or a different ownership stake than the scenario provides.

The key idea is that exit equity value is the PE’s share of the company’s equity value after the IPO. After an IPO, the company has a market value (post-IPO equity value), and the PE’s portion of that value is determined by how much equity they own.

So you multiply the ownership percentage the PE holds after the IPO by the post-IPO equity value. If the post-IPO equity value is 4,000 and the PE owns 60% after the IPO, the exit equity value is 0.60 × 4,000 = 2,400. That matches the given correct choice.

The other numbers would require different post-IPO values or a different ownership stake than the scenario provides.