2. Laurentian Capital Partners, LLC has recently acquired a 40% equity ownership in Bumble Inc. in exchange for a $5 million investment. Laurentian is interested in estimating an expected compound rate of return on its investment. Depending on the success of products currently under development Laurentian's investment in Bumble could turn out to be a complete failure (black hole), barely surviving (living dead), or wildly successful (venture utopia). Laurentian has assigned probabilities of 20.50, and .30, respectively, to the three possible outcomes. Following are the 3 cash flow scenarios or outcomes for the Bumble investment that Laurentian expects to exit at the end of five years. Outcome Yr1 Yr2 Yr3 Yr4 Yr5 Black Hole 0 0 $0 Living Dead 0 0 0 0 $10 million Venture Utopia $50 million 0 0 0 0 Part A A. Calculate the internal rate of return (IRR) for each scenario or outcome for Bumble. B. Calculate the weighted average of the IRRs for the three scenarios. What is the expected IRR for the Bumble venture? C. What would be Laurentian expected IRR if its $5 million investment in Bumble bought only a 35% interest in the venture? D. Show how your answer in Part C would change if Laurentian received a 51% ownership stake in the Bumble venture for $5 million. Part B Now assume under the venture utopia scenario that, in addition to the $50 million cash inflow in year 5, there will be an annual $1million preferred dividend (to be paid to Laurentian but not other equity investors). Laurentian expects to receive this $1 million dividend under the venture utopia scenario in each of the five years that the Bumble investment will be maintained. No preferred annual cash flows are expected under either the black hole or the living dead scenarios. E. Calculate the revised internal rate of return for the venture utopia scenario if Laurentian's equity ownership stake in Bumble is 40% F. What would be Laurentian's expected IRR on the Bumble venture