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Chapter 23, Problem 12P

a.

Summary Introduction

To determine: The initial public offering (IPO) price per share.

Introduction: When a company sells its share publically in an open market for the first time, it is known as initial public offering (IPO).

b.

Summary Introduction

To determine: The percentage of the firm that will be owned by Series A investor, after the IPO issues.

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Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 and received 8 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 12% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 12% 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)?
Starware Software was founded last year to develop software for gaming applications. The founder initially invested $1,000,000 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 $1.00 million and wants to own 18% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 18% 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 33% 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.) The implied price per share is $ per share. (Round to the nearest cent.) b. What will the value of the…
Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 and received 8 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 $1.20 million and wants to own 14% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 14% 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 14% 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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