Suppose you are employed at the STARK Venture Capital, a hypothetical venture capital in Seoul. Your first assignment is to value the price per share for a $7 million investment in a startup and to decide on what share of the firm you should demand. You expect that the startup will earn $20 million in Year 6. Similar profitable companies listed on stock exchanges are trading at an average PE ratio of 15. The firm currently has 500,000 shares outstanding. Tony, your boss, tells you that STARK Venture Capital requires a target rate of return of 80%. Terminal value is 10,000,000. (On some questions, your answer may include a dollar sign, or a percent sign. You should not include these symbols in your answer.) Q1. What is the estimated value of the startup in year 6?

Q2. What is STARK Venture Capital’s future value given its required rate of return?

Q3. How much is STARK VC’s ownership? (Round the result to one decimal place)

Q4. How many shares do you require to the startup? (Use the answer in Q3 and round the result to the nearest whole number.)

Q5. What price per share should you agree to pay? (Round the result to one decimal place)

Q6. What is the pre-money valuation of the startup? (Use the answer in Q5.)

Q7. What is the post-money valuation of the startup?