You have purchased 1 million shares in a restaurant chain venture. At this zero-
ID: 2781504 • Letter: Y
Question
You have purchased 1 million shares in a restaurant chain venture. At this zero-stage investment, your company’s assets are $110,000 plus the idea for your new product. Look back at your restaurant chain venture. Suppose that when you first approach your friendly VC, he decides that your shares are worth only $1.00 each.
a. How many shares will you need to sell to raise the additional $1,370,000?
b. What fraction of the firm will you own after the VC investment? (Round your answer to 1 decimal place.)
Explanation / Answer
a. How many shares will you need to sell to raise the additional $1,370,000?
Answer is 1370000/1 =1370000
b What fraction of the firm will you own after the VC investment? (Round your answer to 1 decimal place.)
No of Shares After investement =1370000+1000000=2370000
fraction of the firm will you own after the VC investment?=1000000/2370000 =42.2%
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