18.3 Pricing stock issues pg. 785

Benjamin Garcia's start-up business is succeeding, but he needs $200,000 in additional funding to fund continued growth. Benjamin an an angel investor agree the business is worth $800,000 and has agreed to invest the $200,000 that is needed. Benjamin presently owns all 40,000 shares in his business. What is a fair price per share and how many additional shares must Benjamin sell to the angel? Because the stock will be sold directly to an investor, there is no spread; the other flotation costs are insignificant.