Please help with this question An entrepreneur seeks $11 million from a VC fund. Theentrepreneur and fund managers agree that theentrepreneur's venture is currently worth $25 million andthat the company will likely be ready to go public in fiveyears. At that time, the company is expected to have a netincome of $7.5 million, and comparable firms are expectedto be selling at a price/earnings ratio of 30. Given thecompany's stage of development, the venture capital fundmanagers require a 45% compound annual return on theirinvestment. What fraction of the firm will the fund receivein exchange for its $11 million investment? Round youranswer to two decimal places.

The company is expected to go public in 5 years.At that time, the company's expected net income will…

Answered: An entrepreneur seeks $11 million from…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 18P

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