Suppose you hold all of the $9.99 million in convertible notes in a start-up (this includes accrued interest). Your note has a $18 million cap and a 20% discount. There are 3 million founders' shares and the option pool contains an additional 3 million shares. A VC is making an A-round investment and requires 25% of the exit value of the firm. (There are no future financing rounds). The VC is investing $11 million and requires a 50% return (annually). The firm will exit in 3 years. a. How many shares do you (the note holder) receive if you convert using the cap? (if your answer is 1 million, record 1,00,000. Round to the nearest share.)
Suppose you hold all of the $9.99 million in convertible notes in a start-up (this includes accrued interest). Your note has a $18 million cap and a 20% discount. There are 3 million founders' shares and the option pool contains an additional 3 million shares. A VC is making an A-round investment and requires 25% of the exit value of the firm. (There are no future financing rounds). The VC is investing $11 million and requires a 50% return (annually). The firm will exit in 3 years. a. How many shares do you (the note holder) receive if you convert using the cap? (if your answer is 1 million, record 1,00,000. Round to the nearest share.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![In this question do not round your intermediate steps. Round your share answers to the nearest share.
Suppose you hold all of the $9.99 million in convertible notes in a start-up (this includes accrued interest). Your note
has a $18 million cap and a 20% discount.
There are 3 million founders' shares and the option pool contains an additional 3 million shares.
A VC is making an A-round investment and requires 25% of the exit value of the firm. (There are no future financing
rounds). The VC is investing $11 million and requires a 50% return (annually). The firm will exit in 3 years.
a. How many shares do you (the note holder) receive if you convert using the cap? (if your answer is 1 million,
record 1,00,000. Round to the nearest share.)
b. How many shares does the VC need to secure the required 25% ownership stake?
O 2,217,550
О 3110,000
O 2,110,000
O 3,217,550](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F62ef4338-0c9e-4b24-8609-77122903df1f%2F3a2a03b7-5b6a-443b-a9e8-f4655d28176e%2F2le5wn3_processed.png&w=3840&q=75)
Transcribed Image Text:In this question do not round your intermediate steps. Round your share answers to the nearest share.
Suppose you hold all of the $9.99 million in convertible notes in a start-up (this includes accrued interest). Your note
has a $18 million cap and a 20% discount.
There are 3 million founders' shares and the option pool contains an additional 3 million shares.
A VC is making an A-round investment and requires 25% of the exit value of the firm. (There are no future financing
rounds). The VC is investing $11 million and requires a 50% return (annually). The firm will exit in 3 years.
a. How many shares do you (the note holder) receive if you convert using the cap? (if your answer is 1 million,
record 1,00,000. Round to the nearest share.)
b. How many shares does the VC need to secure the required 25% ownership stake?
O 2,217,550
О 3110,000
O 2,110,000
O 3,217,550
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