Question
Imagine that you have just been hired as the Chief Financial Officer of a hot startup. The founder has a magnetic personality and has raised
Imagine that you have just been hired as the Chief Financial Officer of a hot startup. The founder has a magnetic personality and has raised a lot of money for the company, which has just been valued at $50mm by an independent auditor. However, he is getting divorced and his soon-to-be-ex-wife wants him to buy out her share of the company. He asks you to calculate how much money this will cost, and you realize no one has ever put together a cap table. Create a cap table based on the following information and calculate what percentage the wife owns and therefore how much money it will take to buy her out. Calculate her percent ownership on the basis of both (a) Shares Outstanding, and (b) Fully Diluted Shares, and explain to the CEO why Fully Diluted Shares should be used, including exactly what the cost difference to him will be
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