A potential investor is seeking to invest $200,000 in a venture, which currently has 100,000 shares held by the founders. You expect the venture to produce $300,000 in income by the end of year five. You also know that a similar venture produced $500,000 in income and sold shares to the public for $2,500,000. Assume the required rate of return is 40%.

1. What is the value of the venture in year five?

2. What is the percent ownership of the venture that must be sold in order to provide the venture investors target return?

3. What is the number of shares that must be issued to the new investor in order for the investor to earn his target return?

4. What is the issue price per share?

5. Compute the pre-money and post-money value of the business.