Susan starts an electric bicycle company with her savings of $200,000. Her new business is successful, and she attracts a $2 million investment from venture capital firm A at a post - money valuation of $5 million. Susan continues to grow her business and meets additional milestones. After seeing that the milestones have been met, venture capital firm A and a new venture capital firm, B, invests a combined $15 million into Susan's electric bicycle firm at a post - money valuation of $40 million. What is Susan' s ownership of the firm after this investment?
Susan starts an electric bicycle company with her savings of $200,000. Her new business is successful, and she attracts a $2 million investment from venture capital firm A at a post - money valuation of $5 million. Susan continues to grow her business and meets additional milestones. After seeing that the milestones have been met, venture capital firm A and a new venture capital firm, B, invests a combined $15 million into Susan's electric bicycle firm at a post - money valuation of $40 million. What is Susan' s ownership of the firm after this investment?
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
Problem 1PS
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Transcribed Image Text:Susan starts an electric bicycle company with her savings of $200,000. Her new business is successful, and she attracts a $2 million investment from venture capital firm A at a post-money valuation of $5 million. Susan continues to grow her business and meets additional milestones. After seeing that the milestones have been met, venture capital firm A and a new venture capital firm, B, invest a combined $15 million into Susan’s electric bicycle firm at a post-money valuation of $40 million. What is Susan’s ownership of the firm after this investment?
Expert Solution
Step 1: Post Money Valuation
Post Money Valuation:
The complete value of a company immediately following an investment is referred to as post-money valuation. The additional money from the most recent funding round is taken into account in this valuation. In essence, it consists of the pre-money valuation (the company's value prior to the investment) and the amount of fresh equity investment.
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