You, as the managing partner at Sequoia Capital are considering an investment of $5 million in a convertible participating preferred stock at a $10 million pre-money valuation. The preference amount on the stock is equal to the amount of the investment (with zero dividends). After one year, you find the business is not doing well so you sell to a strategic buyer for $12 million.

1. Sequoia Capital will receive how much of the exit proceeds? (5 points)