You are a venture capitalist who can invest only $10 million dollars in a firm today.The firm is expected to be worth $100 million five years from now when it has its IPO.If you require to be a 50% owner of the firm's common stock at the time of the IPO,then what is your annualized rate of return on this investment?

Question

Quizplus · Accepted Answer

100 MM ´ .5 = 50 MM of value will be owned in 5 years ====> 10 MM ´ (1 + r )⁵ = 50 MM r = .3797

You Are a Venture Capitalist Who Can Invest Only $10