Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134083278
Author: Jonathan Berk, Peter DeMarzo
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 23, Problem 3P
a.
Summary Introduction
To determine: The number of shares the venture capitalist receives to end up with 20% of the company and the implied price per share.
Introduction: Venture capitalists are investors who provide the capital to start-up business firms or give their support to small companies to expand their business.
b.
Summary Introduction
To determine: The post-money value of the whole firm after investment.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Starware Software was founded last year to develop software for gaming applications. The founder initially invested $900,000 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 $1.20 million and wants to own 39% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 39% 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 $800,000 and received 8.000 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 $1.0 million and wants to own 20% of the company after the
investment is completed.
a. How many shares must the venture capitalist receive to end up with 20% 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 20% 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
$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)?
Chapter 23 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 23.1 - Prob. 1CCCh. 23.1 - Prob. 2CCCh. 23.2 - Prob. 1CCCh. 23.2 - Prob. 2CCCh. 23.3 - List and discuss four characteristics about IPOs...Ch. 23.3 - Prob. 2CCCh. 23.4 - Prob. 1CCCh. 23.4 - What is the average stock price reaction to an...Ch. 23 - Prob. 1PCh. 23 - What are the advantages and the disadvantages to a...
Ch. 23 - Prob. 3PCh. 23 - Suppose venture capital firm GSB partners raised...Ch. 23 - Prob. 5PCh. 23 - Prob. 6PCh. 23 - Prob. 7PCh. 23 - Prob. 8PCh. 23 - Prob. 9PCh. 23 - Prob. 10PCh. 23 - Prob. 11PCh. 23 - Prob. 12PCh. 23 - What is IPO underpricing? If you decide to try to...Ch. 23 - Prob. 14PCh. 23 - Prob. 15PCh. 23 - Prob. 16PCh. 23 - Prob. 17PCh. 23 - Prob. 18PCh. 23 - Prob. 19PCh. 23 - Prob. 20P
Knowledge Booster
Similar questions
- Starware Software was founded last year to develop software for gaming applications. The founder initially invested $700,000 and received 9 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 13% of the company after the investment is completed. a. How many shares must the venture capitalist receive to end up with 13% 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 13% of the company? The venture capitalists will receive million shares. (Round to three decimal places.)arrow_forwardwededarrow_forwardNikularrow_forward
- Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $700,000 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 14,000 shares in the company and the two entrepreneurs will have combined holdings of 21,000 shares. a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.) Valuation of the firm b. What value is the venture capitalist placing on each share? Value of each sharearrow_forwardEthelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $1,346,400 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 20,400 shares in the company and the two entrepreneurs will have combined holdings of 30,600 shares. a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.) b. What value is the venture capitalist placing on each share?arrow_forwardThe startup management is looking to raise venture capital. The pre-money valuation is $10,000,000 with two co-founders holding 40% of the shares each and two investors holding 10% respectively. Now, the platform receives a venture capital injection of $10,000,000. Answer the following questions: i. What is the post-money valuation in $? ii. How much equity does each founder hold in % and $ after the capital injection? iii. How much equity does the venture capital firm hold in % and $ after the capital injection?arrow_forward
- Help Save & Ex Chee Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $918,400 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 16,400 shares in the company and the two entrepreneurs will have combined holdings of 24,600 shares. a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.) Valuation of the firm b. What value is the venture capitalist placing on each share? Value of each share < Prev 2 of 8 Next m arch hp 寻arrow_forwardPlease show all equations and work as needed. Make the correct answer clear. If possible, please type work so it can be copied. Thank you.arrow_forwardThe founders of XMP GmbH have created a successful software as a service platform and are now looking for venture capital to accelerate the growth of the company. Currently, the company is entirely founder-owned and has 10,000.00 shares outstanding. But before they start fundraising, they want their employees to participate in the success story of their business. Therefore, the founders issue shares to an employee share option program (ESOP) so that the entire ESOP represents 20.00% of the ownership of the company. Shortly after that, they receive an offer from the venture capital firm A-Capital. A-Capital offers to invest 4,000,000.00 € at a 16,000,000.00 € pre-money valuation. What is the price per share (PPS) of the round and the total number of shares post-round? 1) The price per share (PPS) equals 1,640.00 €; the total number of shares post-round equals 18,750.00. 2) The price per share (PPS) equals 1,220.00 €; the total number of shares post-round equals 16,525.00. 3) The…arrow_forward
- Your start-up company needs capital. Right now, you own 100% of the firm with 9.99 million shares. You have received two offers from venture capitalists. The first offers to invest $2.99 million for 1.03 million new shares. The second offers $1.95 million for 500,000 new shares. a. What is the first offer's post-money valuation of the firm? b. What is the second offer's post-money valuation of the firm? c. What is the difference in the percentage dilution caused by each offer? d. What is the dilution per dollar invested for each offer? a. What is the first offer's post-money valuation of the firm? The first offer's post-money valuation will be $. (Round to the nearest dollar.)arrow_forwardYou have started a company and are in luck—a venture capitalist has offered to invest. You own 100% of the company with 4.96 million shares. The VC offers $1.12 million for 820,000 new shares. a. What is the implied price per share? b. What is the post-money valuation? c. What fraction of the firm will you own after the investment?arrow_forwardYou founded your firm with a contribution of $700,000, receiving 1,000,000 shares of stock. Since then, you sold 5,000,000 stocks to Angel Investors. Now you are considering raising more capital from a Venture Capitalist. They will invest $7,000,000 and would receive 5,000,000 newly issued shares. What is the post-money valuation? Express the terms of your answer completely and in strictly numerical terms. For example: If your answer is one million dollars, write: 1000000.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning