When the firm is expected to be sold to an acquiring company

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Reference no: EM131529265

Firmin Technologies is expected to earn $6.25 million (NI) in year 5, when the firm is expected to be sold to an acquiring company. Comparable companies have a P/E ratio of about 18. The initial investment the VC is being asked to make is $3.5 million. Before that investment is made there are 1 million shares outstanding. The VC will get new shares. (There is expected to be no debt or available cash at the investment horizon.)

If the VC requires a 70% target return, how much stock should he demand? Please give total number of shares with no commas (for example 2 million is 2000000.)

Reference no: EM131529265

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