Consider the following scenario where a company has just issued preferred stock B worth $5 million. You are asked to back-solve to estimate the value of the underlying common stock.

• Preferred stock A (issued 2 years ago): 300,000 shares sold at $6.00 per share
• Preferred stock B (just issued): 500,000 shares sold at $10.00 per share
• Preferred dividends for both preferred shares A and B will accrue at 8.0% per year, but will not be paid (so we do not use dividends)
• Liquidation Preferences (LP) are: 1) $10.00 per share B; 2) $5.00 per share A
• Series B get full LP first.
• Ser. A get full LP after Ser. B.
• Common start participating only after Ser. A and B get full LP.
• Both types of preferred are convertible 1:1 (into common)
• Common stock: 3,000,000 shares outstanding
• Expected liquidity event in 3.0 years.
• Annual equity volatility (expected) is 40%
• Risk-free rate is 3.0%
• No common dividends are expected

What are the breakpoints in the aggregate equity value?

You may use any method (OPM model OR Lattice model) for your calculations.

SHOW YOUR CALCULATIONS CLEARLY