What fraction of the firm will the fund receive in exchange

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An entrepreneur seeks $11 million from a VC fund. The entrepreneur and fund managers agree that the entrepreneur's venture is currently worth $25 million and that the company will likely be ready to go public in five years. At that time, the company is expected to have net income of $7.0 million, and comparable firms are expected to be selling at a price/earnings ratio of 35. Given the company's stage of development, the venture capital fund managers require a 55% compound annual return on their investment. What fraction of the firm will the fund receive in exchange for its $11 million investment? Round your answer to two decimal places.

Reference no: EM131085514

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