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III. (i) Apex Venture Partners, a VC firm, is planning to invest $7 million today...

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III. (i) Apex Venture Partners, a VC firm, is planning to invest $7 million today in a startup entrepreneurial firm, Russel Holdings. The VC expects the firm to have an exit (IPO) valuation of $300 million in four years and has a discount rate of 30%. The number of shares currently outstanding in Russel is 3 million shares. Calculate the post and pre-money valuations, the stock ownership required by the VC, the price per share, and the number of shares the VC will get based on this valuation. (Three and a half points) (ii) Suppose, modifying the data given in section (ii), you now assume that, in addition to the current VC financing, Russel Holdings will have to issue another round of private equity financing equal to 50% of the equity outstanding to raise additional private financing just prior to IPO in order to go public and receive the $300 million valuation mentioned above, what fraction of equity should Apex demand in return for its investment of $7 million in the firm? Re-compute the pre-money and post-money valuations placed on Russel Holdings today under these revised assumptions. (Two and a half points)

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