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a. What is the total after-the-money valuation of the firm? b. What value is the venture capitalist placing on each share? Note: Round your answer to the nearest whole number.

a. What is the total after-the-money valuation of the firm? b. What value is the venture capitalist placing on each share? Note: Round your answer to the nearest whole number.

Essentials Of Investments
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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Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $560,000 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the venture capital will hold 5,000 shares in the company, and the two entrepreneurs will have combined holdings of 7,500 shares. a. What is the total after-the-money valuation of the firm? b. What value is the venture capitalist placing on each share? Note: Round your answer to the nearest whole number. a. Post-money valuation b. Price per share
Transcribed Image Text:Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $560,000 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the venture capital will hold 5,000 shares in the company, and the two entrepreneurs will have combined holdings of 7,500 shares. a. What is the total after-the-money valuation of the firm? b. What value is the venture capitalist placing on each share? Note: Round your answer to the nearest whole number. a. Post-money valuation b. Price per share
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