how much is a a company woth how much is a a company woth how much is a a compan
ID: 2785941 • Letter: H
Question
how much is a a company woth how much is a a company woth how much is a a company woth Financing a business requires three types of decisions: How much money you need to raise, what financing tools to use, and what sources to use for your financing. This problem set focuses on choosing sources of financing, with a review of the needs and tools issues. Silly Walks, Inc. wishes to raise $500,000 in equity capital, and decides to pitch their company to angel investors. They believe the company can be fairly valued at $1,000,000. 1. Assuming agreement on the valuation of the company, what percentage of the company would an angel investor require, at a minimum, for her $500,000? a. b. Currently the founders of the company own a total of 1,000,000 shares of Silly Walks How many shares will the company need to issue to the angel investor for her $500,0007 s, Inc, a financial services company creating a system for B to C and C to Cdirect payments, is developing their financing plan. Their current plan is intended to cover their startup costs and their first 12 months of operations. In addition to needing $2,000,000 startup costs, they also need to know their operational cash flow for their first year. Based on the income statement below, how much additional cash will they need to cover operations? Ban the Banks, Inc. Pro Forma Profit and Loss $10,000,000 $1,000,000 Net Revenue Cost of Sales Gross Profit $2,500,000 $10,000,000 $2,000,000 $500,000 Administrative Expenses Sales & Marketing R&D; Expenses Depreciation and Amortization Operating Profit (loss) Corporate Income Tax (35%) Net Income (loss)Explanation / Answer
Q1
a.
The Pre money valuation of the company = $1000,000
Amount of equity = $500,000
Hence post money valuation will be $1500,000
The angel investor should ask for 500000/1500000 = 33.33% stake
b.
Present ownership of founders = 1000,000 shares
This means that the price of shares = Value of company/ Number of shares = $1
Hence, the company needs to issue 500,000 shares for $500,000 worth of equity.
Q2 They will need $3.9 Million to cover losses from first year of operations
Net Revenue $ 10,000,000.00 Cost of sales $ 1,000,000.00 Gross Profit $ 9,000,000.00 Administrative expenses $ 2,500,000.00 Sales $ 10,000,000.00 R&D $ 2,000,000.00 Depreciation $ 500,000.00 Operating Loss $ (6,000,000.00) Tax Saving $ 2,100,000.00 Net Loss $ (3,900,000.00)Related Questions
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