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A company is raising their Series A round with a pre - money valuation of $ 4 M and 1 , 0 0 0 ,

A company is raising their Series A round with a pre-money valuation of $4M and 1,000,000 in outstanding shares. They are raising a $1M round, but they have an issued convertible note that will convert. The note's terms are as follows:
$1M Principle Amount
$10M Valuation Cap
20% Discount
If using the Post-Money Conversion Method, how many shares do the noteholders purchase and would they convert at a Discount or Valuation Cap? (10 Points)
Val Cap; 250,000 shares
Discount; 250,000 shares
Val Cap; 312,500 shares
Discount; 312,500 shares
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