Assume you are starting a business with 1000 shares outstanding. The business is projected to have $80,000 in income by year 3. The industry has an average P/E ratio of 20. A friend is considering investing $50,000 in your venture today and requires 35% return on her investment annually.

e. Assume you plan to get a second round of financing at the end of year 1 worth another $50,000. Compute the % ownership acquired by the second investor.

f. What is the founders new % ownership in the venture?

g. What is the new total number of shares in the venture?