What is the minimum total equity value for the company in 3 years’ time required to satisify the venture capitalist’s expected return?

CORRECT TEXT

A venture capitalist invests in a company by means of buying:

• 9 million shares for $2 a share and

• 8% bonds with a nominal value of $2 million, repayable at par in 3 years’ time.

The venture capitalist expects a return on the equity portion of the investment of at least 20% a year on a compound basis over the first 3 years of the investment.

The company has 10 million shares in issue.

What is the minimum total equity value for the company in 3 years’ time required to satisify the venture capitalist’s expected return?

Give your answer to the nearest $ million.

$ million.

View Answer

Answer: 34, 35, 34000000, 35000000