A potential investor is willing to provide $500,000 in first-round financing with the expectation of a 50% annual compound rate of return over the next five years. Founders currently hold 1,000,000 million shares of stock. The venture is expected to produce $500,000 in net income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for $10,000,000.

What is the value of the venture at the end of year 5 using direct capitalization?

What is the post-money valuation?

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

What is the issue price per share?

What is the pre-money valuation?