A potential investor is seeking to invest $$500,000$ in our venture, which currently has $1,000,000$ shares held by us founders. The investor is looking for a $50\%$ return on his money. We expect our venture to produce half a million dollars in income per year for the next five years. We know that a similar venture produced $$1,000,000$ in income and sold shares to the public for $$10,000,000.$

$1.$ What is the percent ownership of our venture that must be sold in order to provide the venture investor's target return?

a$.33\mathrm{.}33\%$ b$.75\mathrm{.}94\%$

C$\mathrm{.}12\mathrm{.}76\%$ d$.15\mathrm{.}00\%$

$2.$ What is the number of shares that must be issued to the new investor in order for the investor to earn his target return?

a$.3,155,844$

b$.1,578,138$

c$.4,156,276$

d$.2,578,138$

$3.$ What is the issue price per share?

a$.$ $$0\mathrm{.}1939$

b$.$ $$0\mathrm{.}1203$

C$.$ $$0\mathrm{.}3168$

d$.$ $$0\mathrm{.}1584$

$4.$ What is the pre$-$money valuation?

a$.$ $$120,354$

b$.$ $$316,828$

c$.$ $$158,436$

d$.$ $$193,919$

$5.$ What is the post$-$money valuation?

a$.$ $$658,436$

b$.$ $$499,936$

c$.$ $$408,377$

d$.$ $$249,977$

$6.$ What is the value of the venture in year five using direct capitalization?

a$.$ $$500,000$

b$.$ $$5,000,000$

c$.$ $$1,000,000$

d$.$ $$100,000$