Benjamin Garcia's start-up business is succeeding, but he needs 200,000 in additional funding to fund continued growth. Benjamin and an angel investor agree the business is worth 800,000 and the angel has agreed to invest the 200,000 that is needed. Benjamin presently owns all 40,000 shares in his business. What is a fair price per share and how many additional shares must Benjamin sell to the angel?

Benjamin Garcia's start-up business is succeeding, but he needs 200,000 in additional funding to fund continued growth. Benjamin and an angel investor agree the business is worth 800,000 and the angel has agreed to invest the 200,000 that is needed. Benjamin presently owns all 40,000 shares in his business. What is a fair price per share and how many additional shares must Benjamin sell to the angel?

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 3P: Benjamin Garcia’s start-up business is succeeding, but he needs $200,000 in additional funding to...

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Benjamin Garcia’s start-up business is succeeding, but he needs $200,000in additional funding to fund continued growth. Benjamin and an angelinvestor agree the business is worth $800,000 and the angel has agreed toinvest the $200,000 that is needed. Benjamin presently owns all 40,000shares in his business. What is a fair price per share and how many additional shares must Benjamin sell to the angel? Because the stock will besold directly to an investor, there is no spread; the other flotation costsare insignificant.
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