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The founders and owners of a private company have funded it through the following rounds of ...

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The founders and owners of a private company have funded it through the following rounds of ...

The founders and owners of a private company have funded it through the following rounds of investment:

Round

Source

Price

Number of Shares

Series A

Self

$1.00

200,000

Series B

Angel

$1.00

300,000

Series C

Venture Capital

$1.25

400,000

The owners decide to take the company public through an IPO, issuing 1 million new shares. Assuming that they successfully complete the IPO, the net income for the next year is estimated to be $5 million. The price of shares is set using average price-earnings ratios for similar businesses of 17.0. What portion of the company will be owned by the angel investor after the IPO?

▸ 16%

▸ 30%

▸ 12%

▸ 22%

Textbook

Fundamentals of Corporate Finance

Edition: 2^nd

Authors: Berk, DeMarzo, Harford

Read 92 times

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