18.4 The CEO of an early-stage software Company is seeking $5 million __ftm yenture capitalists. The reasonable projected net incomC-Qt

$5 mi|lion in year 5 pan be valued at a PE of-20. Furthermore, the sales in year 5 are projected at $25 million. What share of the company would the venture capitalists require if their anticipated rate of return were 50 percent? The company has one million shares ■ outstanding before the venture capitalists purchase shares. What price per share nhpuld the venture capitalists pay?

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TABLE 18.21 Revenues and net income for the expected case and the pessimistic case for DGI. Year 1 2 3 4 5 Expected revenues 0.84 2.82 5.44 8.35 1155 Expected net income 0.18 1.25 2.67 4.17 5.86 Pessimistic revenues 0.42 1.41 2.72 4.18 5.78 Pessimistic net income (0.11) 0.26 0.77 1.25 1.81 Note: All figures in millions of dollars.