Newco has received four rounds of investments (Series A, B, C, and D) for a total of 50M shares of CP plus 10M shares of common claimed by the employees. After the Series D investment, Newco falls on hard times. After searching hard for new financing, the investors finally agree to $10M Series E investment with Vulture Ventures (VV) for 40M shares of CP and a 2X liquidation preference. As part of this agreement, all previous investors (Series A through Series D) give up all their preferred rights and are converted to common stock, so the capital structure of Newco is now 60M shares of common1the Series E CP. As part of the investment, Vulture creates a carve-out: management will receive 20 percent of all exit proceeds, with a value of this carve-out capped at $5M. Vulture Ventures has $250M of committed capital, $50M of lifetime fees, and 20 percent carried interest.

(a) Draw and read the exit diagrams for the management carve-out, for the Series E, and for all other investors combined.

(b) Compute the breakeven valuation for the Series E investment under base-case assumptions.

(c) Compute the implied valuation for the management carve-out under base-case assumptions.