a. How many shares must the venture capitalist receive to end up with 20% 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)? Please proper explain and do not copy from Chegg. Otherwise i have to report the answer.

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
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Question:
Star ware Software was founded last year to
develop software for gaming applications. The
founder initially invested $1,000,000 and received
99 million shares of stock. Star ware 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 $1.40
million and wants to own 20% of the company
after the investment is completed.
a. How many shares must the venture capitalist
receive to end up with 20% 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)?
Please proper explain and do not copy from
Chegg. Otherwise i have to report the answer.
Transcribed Image Text:Question: Star ware Software was founded last year to develop software for gaming applications. The founder initially invested $1,000,000 and received 99 million shares of stock. Star ware 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 $1.40 million and wants to own 20% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 20% 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)? Please proper explain and do not copy from Chegg. Otherwise i have to report the answer.
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