Consider a start-up requiring $6,000 initial funding Furthermore, assume that a VC estimates the firm would yield the following cash flows with probability p=0.80 and 1p=0.20, respectively. The financing arrangement calls for the VC to receive convertible preferred stock with 10% dividend, a $6,000 liquidation preference, and is convertible at any time into common stock at a one-to-one ratio. Based on the VC's cash flows estimates above, the VC would receive 54.4% of equity upon conversion in year 4 , in order to attain his required IRR of 30%. The entrepreneur agrees to the VC's demand to take 54.4% of the equity if he converts to equity in year 4 . However, the entrepreneur has a more optimistic view of the probability of low and high realizations. The entrepreneur assigns p=0.25 and 1p=0.75. Calculate the entrepreneur's expected cash flow in year 4 under his more optimistic view. \begin{tabular}{|l} $14,691 \\ \hline$32,079 \\ \hline$24,610 \\ \hline$12,250 \\ \hline$23,940 \\ \hline \end{tabular} Consider a start-up requiring $6,000 initial funding Furthermore, assume that a VC estimates the firm would yield the following cash flows with probability p=0.80 and 1p=0.20, respectively. The financing arrangement calls for the VC to receive convertible preferred stock with 10% dividend, a $6,000 liquidation preference, and is convertible at any time into common stock at a one-to-one ratio. Based on the VC's cash flows estimates above, the VC would receive 54.4% of equity upon conversion in year 4 , in order to attain his required IRR of 30%. The entrepreneur agrees to the VC's demand to take 54.4% of the equity if he converts to equity in year 4 . However, the entrepreneur has a more optimistic view of the probability of low and high realizations. The entrepreneur assigns p=0.25 and 1p=0.75. Calculate the entrepreneur's expected cash flow in year 4 under his more optimistic view. \begin{tabular}{|l} $14,691 \\ \hline$32,079 \\ \hline$24,610 \\ \hline$12,250 \\ \hline$23,940 \\ \hline \end{tabular}