14. A potential investor is willing to provide $500,000 in first-round financing with the expectation of a 50% annual compound rate of return over the next five years. Founders currently hold 1,000,000 million shares of stock. The venture is expected to produce $500,000 in net income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for $10,000,000. What is the pre-money valuation?a. $120,300b. $316, 800c. $158, 400d. $ 193,900
14. A potential investor is willing to provide $500,000 in first-round financing with the expectation of a 50% annual compound rate of return over the next five years. Founders currently hold 1,000,000 million shares of stock. The venture is expected to produce $500,000 in net income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for $10,000,000. What is the pre-money valuation?a. $120,300b. $316, 800c. $158, 400d. $ 193,900
Chapter15: Harvesting The Business Venture Investment
Section: Chapter Questions
Problem 1eM
Question
![14. A potential investor is willing to provide $500,000 in first-round financing with the
expectation of a 50% annual compound rate of return over the next five years. Founders currently
hold 1,000,000 million shares of stock. The venture is expected to produce $500,000 in net
income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for
$10,000,000. What is the pre-money valuation?a. $120,300b. $316, 800c. $158, 400d. $
193,900](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F386ba787-4a2a-41de-96e6-5dc64254a596%2F895cc333-f527-4404-b699-1a6486311c08%2Fi1uenf_processed.png&w=3840&q=75)
Transcribed Image Text:14. A potential investor is willing to provide $500,000 in first-round financing with the
expectation of a 50% annual compound rate of return over the next five years. Founders currently
hold 1,000,000 million shares of stock. The venture is expected to produce $500,000 in net
income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for
$10,000,000. What is the pre-money valuation?a. $120,300b. $316, 800c. $158, 400d. $
193,900
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