Question
SFV is considering to invest $2M in the first round of financing a startup company Nuevo Uno, which has issued 10M shares of common stock
SFV is considering to invest $2M in the first round of financing a startup company Nuevo Uno, which has issued 10M shares of common stock to the founding entrepreneurial team that will stay to manage the business. It is proposed that after the injection of the investment, SFV will have 5M convertible preferred stock. SFV estimates that Nuevo Uno will have 25% probability for a successful exit in 6 years valued at $120M, with a second round of financing. If the expected retention is 50% and the cost of capital for SFV is 15%, what do you think will be SFVs investment recommendation and why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started