Problem
Green Investors is a venture capital fund that invests in second stage projects. Their investment horizon is five years. Green Investors is negotiating with Zip-line Scooters regarding the % ownership share they will receive for contributing $4 million of second stage capital today. Green requires a 40% annual rate of return. Green estimates EBITDA in year 5 of $7 million and believes that an EBITDA multiple of 5x is reasonable. Zip-line is expected to have $3 million of interest bearing debt and $.5 million of cash five years from now. What ownership % should Green Investors require in exchange for the $4 million investment today?