Anita sought to raise $10 million in private placement of equity in her early stage Internet company. She projected net income of $15 million in year 5 and knew that comparable companies traded at a price range of 15 times earnings (i.e. multiple of 15). She approached Mr. Radachovic of Alliance Capital about an investment.

ASSUME that the companys value in year 5 is $185 million (undiscounted). The amount needed for investment is still $10 million. Mr. Radachovic of Alliance Capital liked Anitas plan but thought it nave in one respect. To recruit an effective senior management team, he felt Anita would have to grant generous stock options in addition to the salaries projected in the business plan. From past experience he felt that management should have the ability to own at least 20% of the company by year 5. Given his beliefs, what share of the company should Radachovic on today if his required rate of return is 50%.