An entrepreneur seeks $4 million from a venture capitalist. They agree that the entrepreneur’s venture is currently worth $12 million and that, when the company goes public in an IPO three years hence, it will have an expected market capitalization of $70 million. Given the company’s stage of development, the VC requires a 40% return on investment. What fraction of the firm will the VC receive in exchange for its $4 million investment? 4. The venture capital fund Techno Fund II made a $4 million investment in Optical Corporation five years ago and, in return, received 1 million shares representing 20% of Optical Fiber’s equity. Optical Fibers is now planning an initial public offering in which it will sell 1 million newly created shares for $50 per share. Techno has chosen to exercise its demand registration rights and will sell its shares-alongside the newly created shares-in Optical Fibers’ IPO. The investment banks underwriting Optical Fibers’ IPO will charge a 7% underwriting spread, so both the firm and Techno Fund II will receive 93% of the $50-per share offer price. Assuming the IPO is successful; calculate the compound annual return that Techno will have earned on its investment.