I have uploaded the workout of the following problem: Lidia Suarez, CEO of NewVenture, seeks to raise \$7 million in a private placement of equity in his early-stage venture. She conservatively projects net income of \$6 million in year five and knows that comparable companies trade at a price earnings ratio of 20X. a. What share of the company will a venture capitalist require today if his required rate of return is 40% per year? b. If the company has 1 million shares outstanding before the private placement, how many shares should the venture capitalist purchase? c. What would be the share price? Jose Nguyen of Growth Capital likes Lidia's business plan but thinks it nave in one respect: to recruit a senior management team, he believes Lidia will have to grant generous stock options in addition to the salaries projected in his business plan. From previous experience, he thinks management should have the ability to own at least a 15% share of the company by the end for year 5 . Given his beliefs, c. what share of the company should Jose insist on today if his required rate of return is 40% ? d. How many shares would he get? On further analysis and discussion, Lidia and Jose agree that the company will probably need another round of financing in addition to the current $7 million. Jose believes that NewVenture will need an additional $4 million in equity at the beginning of year 3. While the first-round investors (including himself) will required a 40% return, Jose feels that round 2 investors, in recognition of the progress made between now and then, will probably have a hurdle rate of only 30%. As before, management should have the ability to own a 15% share of the company by the end of year 5 . c. what share of the company should Jose insist on today if his required rate of return is 40% ? d. How many shares would he get? e. What share of the company would the second-round investors get