Pre-money value of the company at the time of investment

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Reference no: EM133578579

Question

A VC is considering a $10 million investment in a company and the VC projects a 25% annual growth rate in sales and profits. The VC expects the company to reach $20 million in profits after 5 years, when the VC thinks it could probably be sold for a p/e (price-earnings ratio) of 20. The VC expects a return of 50% on new investments.

1. What percentage of the company should the VC ask for a $10 million investment?

2. What is the pre-money value of the company at the time of the investment?

Reference no: EM133578579

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