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A potential investor is seeking to invest $750,000 in our venture at an expected 40% rate of return. The firm currently has 2,000,000 shares held by the founders. The venture is projected to generate $850,000 in income per year over the next 5 years. A comparable firm produced $1,750,000 in income, and has a total market cap of $15,000,000. 1) What ownership percentage of our firm must be sold in order to provide the investor with their targeted return? (round to 5 decimal places) 2) What number of shares must be issued to the new investor in order for the investor to earn his targeted return? (round up to whole shares) 3) What is the issue price per share? (round to 5 decimal places) 4) What is the pre-money valuation? (round up to whole dollars) 5) What is the post-money valuation? (round up to whole dollars) 6) What is the value of the venture in year five using the direct capitalization method? (whole $’s) 7) What is the value of the venture in year five using the direct comparison method? (whole $’s)

Financial Management, Finance

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