Calculate the shares of stock

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A venture capital firm wants to invest $5 million in Artichoke Corp., a startup biotech firm. Artichoke is expected to go public in 4 years. Earnings will be negligible until year 4 but are projected to be $4 million in year 4. Comparable biotech firms are trading at P/E ratios of 18 on average. Artichoke has 3 million shares of stock outstanding. The VC firm will apply a discount rate of 40% to the investment. How many shares of stock should the VC firm be given for its $5 million investment?

Reference no: EM133111514

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