Net Asset Value for Shares in Startup

Assume a situation where an employee of a privately-held startup exercises a share option and receives 1 share and decides to leave. Per the option agreement the company has an ‘option’ to purchase all shares held by that employee at the Net Asset Value per share.

Other basic facts about Company X:

• Company X is a technology startup that just received $1m cash from a VC based on a $5m valuation. This is due to the unique software it sells to customers.
• Company X only holds the cash as an asset on the balance sheet and has no liabilities.
• Company X recently had a non-binding offer to sell for $7m.

If the company decides to exercise the buyback option how will the ‘net asset value’ be calculated?