QUESTION $4$

MWIBROS Tracking and Surveillance Co$.$ is asmall private company valued at K$3$ million Kwacha and is in the business of fast moving bio$-$technology seeking to help in tracking social interactions and social distancing in the wake of COVID$-19.$ The founder of the enterprise, Dr$.$ John Mwiinga, is currently seeking for funds amounting to K$2\mathrm{.}0$million to develop the tracking software. Dr$.$ Mwiinga and the angel investor have tentatively agreed to $50\%$ percent return on investment for the venture capitalist, if he were to contribute the funding gap requirement. The company is expected to go public in five years and its market.capitalization is projected to be K$15$ million.

REQUIRED:

The venture capitalist has hired you to conduct a due diligence on MWIBROS Tracking and Surveillance Co$.$: You are required to provide a due diligence report to the venture capitalist. In your report, please highlight the following:

a$.$ What variables does this venture capitalist need to take into consideration when choosing a company to invest?

$[10$Marks$]$

b$.$ What are the various forms of financing available to the venture capitalist? Recommend the appropriate one for MWIBROS Tracking and Surveillance Co$.$

$[10$ marks$]$

c$.$ What fraction of the firm will the VC receive in exchange for its $K2$ million investment in your company?

$[5$ marks$]$

$($Total: $25$ Marks$)$