As Founder of NEC, you initially own 100% of the 4.0 million shares of commons stock issued by the company.

A VC offers to invest $12.0 million in your company at a premoney valuation of $20.0 million.

Assume that the VC and you (the Founder) agree to set aside 20% of the company for the employee option pool.

1. What percentage of the company will you own after this financing is completed? (Correct answer: 42.5%)

2. How many shares will be outstanding (of course, include preferred shares as if they were converted into common stock) after the financing?

Correct Answer: 9.412 Mn

3. How many shares will the VC own after this financing? Correct Answer: 3.529 Mn

What are step-by-step solutions to get to these answers?