Explanation

The correct answer is B ($70,800,000). Here's the breakdown:

1. Management Fee Calculation:

   • Year-end valuation = $1,500,000,000 × (1 + 20%) = $1,800,000,000
   • Management fee = $1,800,000,000 × 2% = $36,000,000

2. Incentive Fee Calculation:

   • The hurdle rate is 6%, so the minimum required return = $1,500,000,000 × 6% = $90,000,000
   • Excess return = $1,800,000,000 - $1,500,000,000 - $90,000,000 = $210,000,000
   • Incentive fee = $210,000,000 × 20% = $42,000,000

3. Total Fees:

   • Total fees = Management fee + Incentive fee = $36,000,000 + $34,800,000 (adjusted for netting) = $70,800,000

Why not A or C?

• A ($34,800,000) incorrectly omits the management fee.
• C ($78,000,000) fails to net the management fee from the incentive fee calculation, leading to an overestimation.