Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are considering two rounds of venture capital financing for your business. In five years, the stepping out year cash flow is expected to be

You are considering two rounds of venture capital financing for your business. In five years, the stepping out year cash flow is expected to be $2,500,000; the required return is expected to be 13% and the perpetual growth rate is expected to be 5%, giving a cap rate of 8%.The entrepreneur plans to have a first round financing of $2 million today.You currently hold 5 million shares of stock and plans to retain these holdings.The first-round financier has a required return of 60%.

a) How many additional shares must you issue to the investor?

b) How many shares must you have authorized to make this deal?

c) What percentage ownership will the investor hold after the investment?

d) Find the price per share after the financing round.

e) Find the pre-money and post money values of the company.

f) Who controls the company after the investment is made?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Practical financial management

Authors: William r. Lasher

5th Edition

0324422636, 978-0324422634

More Books

Students also viewed these Finance questions

Question

Why are nurturant roles hazardous to health?

Answered: 1 week ago

Question

What are some of the reasons that women report more pain than men?

Answered: 1 week ago