Suppose a venture fund wishes to base its required return (used in discounting future terminal values) on

Question:

Suppose a venture fund wishes to base its required return (used in discounting future terminal values) on its historical experience and suggests merely averaging the rates on the last three concluded deals. These deals realized total returns of −67 percent at the end of two years, 50 percent at the end of five years, and 70 percent at the end of three years, respectively.
A. Assuming no intermediate flows before the terminal payoff, verify that the associated annualized rates are −42.55 percent, 8.45 percent, and 19.35 percent.
B. What is the equally weighted average annualized return?
C. Does it make sense to use this as a single to apply across scenarios involving different durations?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...