Financing a business requires three types of decisions: How much money you need to raise, what financing tools to use, and what sources to use for your financing. This problem set focuses on choosing financing tools and sources.

1. Silly Walks, Inc. wishes to raise $500,000 in equity capital, and decides to pitch their company to angel investors. They believe the company can be fairly valued at $1,000,000.

a. Assuming agreement on the valuation of the company, what percentage of the company would an angel investor require, at a minimum, for her $500,000?

b. Currently the founders of the company own a total of 1,000,000 shares of Silly Walks. How many shares will the company need to issue to the angel investor for her $500,000?