Consider a start-up requiring $5,500 initial funding Furthermore, assume that a VC estimates the firm would yield the following cash flows with probability p = 0.8 and 1 - p = 0.2, respectively.

Year	0	1	2	3
Cash flow	-5,500
p = 0.75		660	660	5,500
1 - p = 0.25		660	660	50,000
Expected cash flow	-5,500

Based on his estimates above, the VC demands 80.1% of equity in a simple common stock capitalization in order to attain his required IRR of 40%.

The entrepreneur agrees to the VC's demand to take 80.1% of the equity. However, the entrepreneur has a more optimistic view of the probability of low and high realizations. The entrepreneur assigns p = 0.20 and 1 - p = 0.80. Calculate the entrepreneur's expected cash flow in year 3 under his more optimistic view.

Group of answer choices

$9,463

$8,179

$7,216

$6,683

$5,829