A venture has been formed with 3,000,000 shares held by the founders. New investors add $1,000,000 for new shares. The venture will exit (horizon time) in 5 years. Investors require an annual return of 50%. The venture will have an income of $1,000,000 per year at exit. A similar venture sold shares to public for $20,000,000 and has earned an income of $2,000,000 in last year. Compute the following: a. Acquired % of ownership b. Shares to be issued c. Issue share price d. Pre- and post-money valuation e. Founders and new investors' % between financing and exit. D Now assume that there will be a second round of investment of $1,000,000 after 2 years. Repeat all questions in problem # 2 and calculate them for investors from both rounds.
A venture has been formed with 3,000,000 shares held by the founders. New investors add $1,000,000 for new shares. The venture will exit (horizon time) in 5 years. Investors require an annual return of 50%. The venture will have an income of $1,000,000 per year at exit. A similar venture sold shares to public for $20,000,000 and has earned an income of $2,000,000 in last year. Compute the following: a. Acquired % of ownership b. Shares to be issued c. Issue share price d. Pre- and post-money valuation e. Founders and new investors' % between financing and exit. D Now assume that there will be a second round of investment of $1,000,000 after 2 years. Repeat all questions in problem # 2 and calculate them for investors from both rounds.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A venture has been formed with 3,000,000 shares held by the founders. New investors add
$1,000,000 for new shares. The venture will exit (horizon time) in 5 years. Investors require
an annual return of 50%. The venture will have an income of $1,000,000 per year at exit. A
similar venture sold shares to public for $20,000,000 and has earned an income of $2,000,000
in last year.
Compute the following:
a. Acquired % of ownership
b. Shares to be issued
c. Issue share price
d. Pre- and post-money valuation
e. Founders' and new investors' % between financing and exit.
3. Now assume that there will be a second round of investment of $1,000,000 after 2 years. Repeat
all questions in problem # 2 and calculate them for investors from both rounds.
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