You have started a company and are in luck-a venture capitalist has offered to invest. You own 100% with 5.12 million shares. The VC offers $1.02 million for 820,000 new shares. a. What is the implied price per share? b. What is the post-money valuation?
You have started a company and are in luck-a venture capitalist has offered to invest. You own 100% with 5.12 million shares. The VC offers $1.02 million for 820,000 new shares. a. What is the implied price per share? b. What is the post-money valuation?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation
Section: Chapter Questions
Problem 9MC
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Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 and received 10 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $1.20 million and wants to own 39% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 39% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)?
![You have started a company and are in luck—a venture capitalist has offered to invest. You own 100% of the company
with 5.12 million shares. The VC offers $1.02 million for 820,000 new shares.
a. What is the implied price per share?
b. What is the post-money valuation?
c. What fraction of the firm will you own after the investment?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcca456ec-07dc-4f25-a92d-07089e2fcb34%2Fadaaf162-2412-4b0a-beac-0bc2d641be33%2F7m48pa6_processed.png&w=3840&q=75)
Transcribed Image Text:You have started a company and are in luck—a venture capitalist has offered to invest. You own 100% of the company
with 5.12 million shares. The VC offers $1.02 million for 820,000 new shares.
a. What is the implied price per share?
b. What is the post-money valuation?
c. What fraction of the firm will you own after the investment?
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