Investment in a company

You are seeking $2.5 million from a venture capitalist to finance the launch of your online financial search engine. You and the VC agree that your venture is currently worth $3 million and that, when the company goes public in an IPO five years hence, it will have an expected market capitalization of $25 million. Given the company’s stage of development, the VC requires a 50% return on investment.

What fraction of the firm will the VC receive in exchange for its $2.5 million investment in your company?

Round your answer to two decimal places. %

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