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.

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
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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? Because the stock will be
sold directly to an investor, there is no spread; the other flotation costs
are insignificant.

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