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Starware Software was founded last to year develop software for gaming applications. The founder initially invested $800,000 and received 10 million shares of stock. Starware 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 19% of the company after the investment is completed. How many new shares must be issued to the venture capitalist so the VC ends up with 19% of the company? What is the implied price per share of this funding round? Issue 1.12 million shares to VC, Implied share price of $0.93 Issue 1.52 million shares to VC, Implied share price of $0.72 Issue 2.35 million shares to VC, Implied share price of $0.60 Issue 1.90 million shares to VC, Implied share price of $0.80

Starware Software was founded last to year develop software for gaming applications. The founder initially invested $800,000 and received 10 million shares of stock. Starware 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 19% of the company after the investment is completed. How many new shares must be issued to the venture capitalist so the VC ends up with 19% of the company? What is the implied price per share of this funding round? Issue 1.12 million shares to VC, Implied share price of $0.93 Issue 1.52 million shares to VC, Implied share price of $0.72 Issue 2.35 million shares to VC, Implied share price of $0.60 Issue 1.90 million shares to VC, Implied share price of $0.80

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
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Starware Software was founded last to year develop software for gaming applications. The founder initially invested $800,000 and received 10 million shares of stock. Starware 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 19% of the company after the investment is completed. How many new shares must be issued to the venture capitalist so the VC ends up with 19% of the company? What is the implied price per share of this funding round? Issue 1.12 million shares to VC, Implied share price of $0.93 Issue 1.52 million shares to VC, Implied share price of $0.72 Issue 2.35 million shares to VC, Implied share price of $0.60 Issue 1.90 million shares to VC, Implied share price of $0.80
Transcribed Image Text:Starware Software was founded last to year develop software for gaming applications. The founder initially invested $800,000 and received 10 million shares of stock. Starware 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 19% of the company after the investment is completed. How many new shares must be issued to the venture capitalist so the VC ends up with 19% of the company? What is the implied price per share of this funding round? Issue 1.12 million shares to VC, Implied share price of $0.93 Issue 1.52 million shares to VC, Implied share price of $0.72 Issue 2.35 million shares to VC, Implied share price of $0.60 Issue 1.90 million shares to VC, Implied share price of $0.80
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