a new firm called is negotiating its Series A term sheet with a venture capital company that is wanting to invest $2M for 35% of shares. Two years prior to the Series A round, the company raised an unpriced seed round. It signed a convertible note with another venture capital firm. The principle amount of note is $500,000 with a 5% non-cumulative interest rate. The conversion price for the convertible note will be lower of the price calculated as i) (Option 1) the cash price paid per share for equity securities by the investors in the qualified financing round multiplied by 0.5, and ii) (Option 2) the quotient resulting from dividing $6,000,000 by the number of outstanding shares of common stock of the company immediately prior to the qualified financing round. Prior to the seed round financing, the founders and management team hold 1 million shares.

1. What will be the conversion price of the convertible note?

2. How many shares will the company get in the Series A round?

3. Assume that the first capital venture company requires 20% shares of the firm and it l agreed to an investment amount and pre-money valuation that make First Capital indifferent between choosing Option 1 and Option 2. What is the new post-money valuation after the negotiation?