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Starware Software was founded last year to develop software for gaming applications. The founder initially invested $700,000 and received 12 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitali interested in investing. This venture capitalist will invest $1.40 million and wants to own 22% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)? a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? The venture capitalist will receive million shares. (Round to three decimal places.)

Starware Software was founded last year to develop software for gaming applications. The founder initially invested $700,000 and received 12 million shares of stock. Starware now needs to raise a second round of capital, and it has identified a venture capitali interested in investing. This venture capitalist will invest $1.40 million and wants to own 22% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)? a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? The venture capitalist will receive million shares. (Round to three decimal places.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Starware Software was founded last year to develop software for gaming applications. The founder initially invested $700,000 and received 12 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 22% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)? a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? The venture capitalist will receive ☐ million shares. (Round to three decimal places.)
Transcribed Image Text:Starware Software was founded last year to develop software for gaming applications. The founder initially invested $700,000 and received 12 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 22% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? b. What will the value of the whole firm be after this investment (the post-money valuation)? a. How many shares must the venture capitalist receive to end up with 22% of the company? What is the implied price per share of this funding round? The venture capitalist will receive ☐ million shares. (Round to three decimal places.)
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