2. EBV is considering a $5M Series C investment in Newco. EBV proposes to structure the investment as 6M shares of convertible preferred stock. Following the Series B investment, Newco will have 10M common shares outstanding and would have 16M shares outstanding on conversion of the CP. EBV estimates a 15 percent probability for a successful exit, with an expected exit time in 5 years and an exit valuation of $500M. The $100M EBV fund has annual fees of 2 percent for each of its 10 years of life and earns 25 percent carried interest on all profits. (a) What is your investment recommendation for EBV? (Show all steps.) (b) What is the exit valuation amount that would make LPs indifferent with the investment?