An Internet portal aimed at pet owners has just developed a nuclear sewing machine and offers you the opportunity to invest in the industrialisation of this product. The project will last five years, and for four years you will not be paid a dividend. But if the company is floated on the stock exchange after five years (which is the plan), you will get

€5m. The founders of the portal estimate that your initial investment will be about €2.5m.

What return will this project bring you?

Given the project's risk, you decide that you require a return of more than 20%. What investment do you offer?

The founders, keen to obtain the €2.5m in question and believing firmly in the success of their project, offer you the following arrangement: you give them €2.5m and, if all goes well, you'll get €5m after five years. If the project fails, then they'll give you €1m after five years out of the

€2.5m you invested. They believe that this reduces your risk considerably. How would you go about tackling this problem (without doing any calculations)?

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