A company seeks to raise $5m in VC financing. It is a US-based medical device company. The founder estimates that the exit value of the startup will be $150m in five years through an acquisition.

Q1: Suppose that a VC has required or target rate of return of 50% and expects an exit in 5 years (no other financings expected). What share of the company would she have to ask for given the $5m investment if she makes the investment?

Q2: If the company had 1,000,000 shares before this offering, how many would the VC purchase with this equity claim?