Ruby Tui Venture Capital has a target rate of 50% per annum, makes an investment of $4.0 million today, and foresees an exit of $80 million in five years. The exit value includes the $4.0 million investment. There are currently 400,000 shares. a) What ownership percentage does the VC require to make the investment? b) How many new shares are issued to the VC? c) The probability of success (exit at $80 million) is 30% and the probability of failure (exit at $0) is 70%. What is the expected IRR?

Ruby Tui Venture Capital has a target rate of 50% per annum, makes an investment of $4.0 million today, and foresees an exit of $80 million in five years. The exit value includes the $4.0 million investment. There are currently 400,000 shares. a) What ownership percentage does the VC require to make the investment? b) How many new shares are issued to the VC? c) The probability of success (exit at $80 million) is 30% and the probability of failure (exit at $0) is 70%. What is the expected IRR?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 15P

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