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Shwadins Shawarma Shops (S 3 ) is a new restaurant chain in its early stages. The founders have great plans, but need to test their
- Shwadins Shawarma Shops (S3) is a new restaurant chain in its early stages. The founders have great plans, but need to test their restaurant design, their recipes, and their franchising business model. They need $200,000 to outfit a first, small shop. They do not have the financial resources to take out loans nor the connections to fund it through FFF investments. They believe they have a million dollar idea, but potential investors are not so sure. Many are interested, but none will place a valuation on the business above $250,000.
- If the founders were to raise money by selling equity, at a $250,000 pre-money valuation, how much of the company would they have to sell?
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- Suppose the founders have issued themselves 100,000 shares in total.
- If the founders were to raise money by selling equity, at a $250,000 pre-money valuation, how much of the company would they have to sell?
- Suppose the founders have issued themselves 100,000 shares in total.
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- Given your answer to (a), how many shares will be outstanding after the new investors are issued their shares?
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- What price will the new investors pay per share to raise the $200k (assume still a $250k valuation)?
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- Summarizing, how many shares will the owners need to sell, and at what price, to raise the $200,000? Should they do this, or find a better way? Why?
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