Question
Macrosoft Corp. is a small computer software development business established a few years ago by Bernie and Mike, who contributed a total of $400,000 cash
Macrosoft Corp. is a small computer software development business established a few years ago by Bernie and Mike, who contributed a total of $400,000 cash to capitalize Macrosoft.
As a result of subsequent stock issues to Bernie (for an additional $200,000) and to employees of the corporation (in lieu of cash bonuses when the corporation was nearly bankrupt a few years ago), Bernie now owns 45 percent of the stock, Mike owns 20 percent, and 35 percent is owned by sixty different employees, none of whom holds more than 1% of the stock. The aggregate value of the stock of Macrosoft, which is not publicly traded, is about $5,000,000, but if Macrosoft does not keep pace with the development of new software, it could be bankrupt within a year. The corporation requires approximately $1,000,000 to fund new research and has devised the following plan:
(a) Bernie will lend the corporation $200,000. The loan will be
represented by a promissory note due in ten years, and will bear interest at the prime rate, plus three percent, compounded and due semi-annually.
(b) Mike will lend the corporation $100,000 for one year, at the prime rate, and purchase 100 shares of $300 dollar par value preferred stock for $300,000.
(c) Ivan Milkem, a venture capitalist, will purchase $400,000 worth of common stock.
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