Question: Office Helpers is a private firm that manufactures and sells office supplies. The firm has limited capital and is estimated to have a value of $ 80 million with the capital constraints. A venture capitalist is willing to contribute $ 20 million to the firm in exchange for 30% of the value of the firm. With this additional capital, the firm will be worth $ 120 million.
a. Should the firm accept the venture capital?
b. At what percentage of firm value would you (as the owner of the private firm) break even on the venture capital financing?