John Thompson, CEO of WVU, Inc., wants to raise $5 million in a private equity in his early stage venture. Thompson conservatively projects net income of $8 million in year five (five years from now) and knows that comparable companies trade at a price to earnings ratio of 16X.

A.) If the company has 1,000,000 shares outstanding before the private placement, how many shares should the venture capitalist purchase?

B.) What percent of the company should be buy if her required rate of return is only 30%?

C.) John feels that he may need as much as $12 million in total outside financing to launch his new product. If he seeks to raise the full amount in this round, how much of his company will he have to give up (assume VC wants the standard 50%)?