As the founder of a startup company that designs portable scoters, you recently received a financing offer from Ali Ventures. The investment amount will be $5M at a pre-money valuation of $15M. Investors ask for participating preferred stock with a liquidation preference of 2.0x and a dividend of 10% per year. You expect that the company could be sold in five years.

A. What is the amount of the preferred terms?

B. What is the cash flow to the founders if the company is sold at $50M after five years?

C. What is the cash flow to the founders if the participating preferred stock has a cap of $40M?

D. Which option is better for you, with cap or without cap?