Problem 1 (total 12 points) Investor is considering investing $5m in a venture project. After due diligence investor thinks that exit from the project with EV/EBITDA multiple at 7x at the end of 5th year is highly possible if the will be successful. Using the following information, determine the probability that the project survives until the end of the 5th year (4 points).

.Year 1 2 3 4 5

Failure probability 50% 30% 20% 20% 15%

1. Calculate NPV and IRR of the investments (4 points) if:

Venture capitalist required return is 35%

Venture project has forecasted EBITDA in the 5th year will be $50m

B Will investor be interested in the ownership of 25%? (4 points)