Question 2 20 marks Revisit Later You have asked Mr X to setup new venture and a sum of rupee ten lakhs was given for this purpose. You invited one of your best friends to be part of this venture and he also invested a sum of rupee five lakhs. You invested your own savings of rupees seven lakhs. With this investment you incorporated NEWVENTURE with one lakhs outstanding common equity shares. You project that at the end of year 5, this company will be very similar to DGF Ltd in terms of revenue generation, size of balance sheet, customer base and employees. ABC Ltd has price earning ratio of 50. The estimated earning of your company at end of five year is Rs. five crores. Mr. Aditya is venture capitalist and you are able to convince him for making investment in IDEAVENTURE. He is expecting a return of 50% and he is willing to make investment of Rs. ONE lakhs. How many shares will be issued to him? What will be your SWEAT EQUITY?" Check consistency of return in investment for following types of investors in your venture Round 0 or Series A Time of investment=0 year Investment horizon = 5 years Expected return -50% Fund raised Crores Rs. ONE Round 1 or Series B Time of investment = 3rd Round 2 or Series C Time of investment =4th year Investment horizon = 2 Investment horizon year years Expected return-30% Fund raised Rs. Three crores = year Expected return -25% Fund raised Rs. Five crores [20 Marks]