(Solved by Expert Tutors) You plan to invest $5,000,000 in a red hot private company in Boston.

The investment schedule is as follows: First round, $3 million at the beginning of year 1; Second round, $1 million at the beginning of year 3, and Third round, $1 million at the beginning of year 5. You plan to exit at the end of year 5 and require an IRR of 50%. At year 5, the net income will be $5 million. Similar companies have an average PE ratio of 40. Please use Sahlman?s VC Method to analyze your ownership and share price at each round of financing.

 

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