1. An entrepreneur needs $5 Million for her idea. She has registered a company and needs your advice to know how many percentages of her companys ownership is required to be given to investor to be able to raise this money (Bank loans are not going to be granted).

• Investor Required rate of return per year 70%
• Holding period 5 years
• Estimated EBITDA of firm in year 5, $50 Million, with estimated EBITDA multiple of 5 and no interest-bearing debt and cash in year 5.

(4 marks)

2. How much is the post money and pre money value for part 1?

(4 marks)

3. Explain in detail why required rate of return demanded by investors to invest in start-ups is so high and what are the ways to reduce it. Each way must be comprehensively discussed with underlying reasons and effects.

(6 marks