Assume you are a venture capitalist who will make a $2.5 million investment today and will recoup your investment in five years. The expected net income of the project in year five is $1.8 million and the comparable P/E ratio for the industry is 22. Your required rate of return is 55%.
a.Compute the future value of your investment.
b.What is the terminal value of the project?
c.What is your ownership level?
d.Assume the firm originally has 250,000 shares outstanding, what is the total number of new shares after your investment?
e.What is the price per share that you paid?
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