QUESTION 3 (25 MARKS) (a) A potential investor is seeking to invest RM500,000 in a venture, which currently has 1,000,000 million shares held by its founders, and is targeting 50% return five years from now. The venture is expected to produce half a million dollars in income per year at year 5. It is known that a similar venture recently produced RM1,000,000 in income and sold shares to the public for RM10,000,000. (1) What is the percent ownership of our venture that must be sold in order to provide the venture investor's target return? (3 marks) Continued.... CLL ENTRALINELLIRLALLIANCE 17 OCTOOL.2020 (1) What is the number of shares that must be issued to the new investor in order for the investor to earn his target return? (3 marks) (ii) What is the issue price per share? (3 marks) (iv) What is the pre-money valuation? (3 marks) (v) What is the post-money valuation? (3 marks) (iv) What is the value of the venture in year five using direct capitalization? (3 marks) (b) Discuss how the weighted average cost of capital (WACC) for venture changes over a successful life cycle. (7 marks)