a. The total amount of investment is $1,000,000 + $2,500,000 + $3,000,000 = $6,500,000. Therefore, the initial value of the company’s equity is $6,500,000 - $3,500,000 = $3,000,000.

b. The management needs to surrender $3,500,000 - $1,000,000 = $2,500,000 of equity ownership to acquire the shares.

c. At the end of year five, the venture investor will receive a return of 15% per year on their investment of $2,500,000, which is $2,500,000 x 0.15 x 5 = $1,875,000. The bank loan will require an interest payment of 10% per year on the $3,000,000 borrowed, which is $3,000,000 x 0.10 x 5 = $1,500,000. Therefore, the total return on investment for the company’s executives is $3,500,000 - $2,500,000 - $1,875,000 - $1,500,000 = -$375,000. This means that they lost money on the investment. The rate of return on investment is calculated as the total return divided by the initial investment, which is -$375,000 / $3,000,000 = -12.5%.