Question: A VC is drafting a term sheet for a potential investment in a venture. The estimated discounted terminal value of the venture is $25 million.

A VC is drafting a term sheet for a potential investment in a venture. The estimated discounted terminal value of the venture is $25 million. The venture has 1 million shares outstanding currently. The VC plans to invest is $5 million.

How many new shares of convertible preferred stock should be issued in order achieve the VC's required rate of return?

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