A Potential Investor Is Willing to Provide $500,000 in First-Round

question 56

Multiple Choice

A potential investor is willing to provide $500,000 in first-round financing with the expectation of a 50% annual compound rate of return over the next five years. Founders currently hold 1,000,000 million shares of stock. The venture is expected to produce $500,000 in net income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for $10,000,000. What is the percent ownership of the venture that must be sold in order to provide the venture investor's target return?

• A)33.33%
• B)75.94%
• C)12.76%
• D)15.00%

---

Definitions:

Procure Funding

The process of obtaining financial resources or support for projects, research, or programs.

Critical Needs

Essential requirements or necessities that must be met to ensure the survival or well-being of individuals or systems.

Industrial Revolution

A period of major industrialization that took place during the late 1700s and early 1800s, marked by dramatic advancements in manufacturing and production technology.

Scientific Management

A theory of management that analyzes and synthesizes workflows, aiming to improve labor productivity.