A venture is expected to have an exit value of $10,000,000 five years from now. If venture investors invest $1,000,000 now, and expect a 20% compounded rate of return on their investment, what portion of the exit value would they need?

Question

Quizplus · Accepted Answer

To find the portion of the exit value needed, calculate the future value of the investment using the formula: Future Value = Present Value * (1 + rate)^n. Here, Future Value = $1,000,000 * (1 + 0.20)^5 = $2,488,320. Then, divide this by the exit value: $2,488,320 / $10,000,000 = 0.248832, or approximately 24.9%.

A Venture Is Expected to Have an Exit Value of $10,000,000