Last year, East Lansing Venture Capital (ELVC) invested in a startup, BroadTech ($6M Series A investment in BroadTech for 6M shares of convertible preferred stock). At that time, the founders of BroadTech, who stay with the firm, held 12M shares of common stock (i.e., following the Series A investment, BroadTech has 12M common shares outstanding and would have 18M shares outstanding upon conversion of the CP). NOW, ONE YEAR LATER, Spartan VC (SVC) is considering an $10M Series B investment in BroadTech for 6M shares of CP. The employees of BroadTech have claims on 12M shares of common stock, and the previous venture investors (ELVC) hold 6M shares of Series A CP. (i.e., following the Series B investment, BroadTech will have 12M common shares outstanding and would have 24M shares outstanding upon conversion of all the CP). SVC estimates a 50 percent probability for a successful exit, with an expected exit time in four years. The $300M SVC fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits. Carry Basis is Committed Capital. Also, assume the following: (1) SVC's Cost of Capital (r_vc): 10 percent. (2)

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