You started a venture 2 years ago with $400,000 dollars and own 60% of the 500,000 shares issued. What is the pre and post money valuations under each deal offered: • Alpha Ventures offers $200,000 for 20% of the firm • Beta Ventures offers $400,000 for 600,000 new shares • Kappa Ventures offers $200,000 for 100,000 existing shares

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Answer:

Alpha Venture :Post money $1,000,000

Alpha Venture :Post money $800,000

Beta Ventures Post money $400,000

Beta Venture Pre-money $800,000

Kappa Ventures Post money $200,000

Kappa Ventures Pre money $400,000

Explanation:

Calculation for Alpha Ventures Post money:

$200,000/20%=$ 1,000,000

Alpha Ventures Pre-money will be :

$1,000 000- $200,000

= $800,000

Calculation for Beta Ventures Post money

= $400,000

Beta Ventures Pre-money will be:

=$ 400,000+$400,000

=$800,000

Calculation of Kappa Ventures Post money:

= $200,000

Kappa venture Pre-money will be:

= $200,000+$200$000

= $400,000

The pre and post-money valuations under the three deal offerings are as follows:

Deals                       Investment   Pre-money   Post-money

                                   Amount       Valuation      Valuation

Alpha Ventures       $200,000     $800,000    $1,000,000 ($200,000/20%)

Beta Ventures         $400,000     $552,381        $952,381 ($400,000/42%)

Kappa Ventures     $200,000   $1,466,667    $1,666,667 ($200,000/12%)

Data and Calculations:

                                     Dollars       Number    Percentage

                                                      of Shares      Holding

Capital investment = $400,000   500,000        60%

Total capital              $666,667     833,333       100%

Beta Ventures:

Total new shares = 1,433,333 (833,333 + 600,000)

Percentage holding = 42% (600,000/1,433,333 x 100)

Kappa Ventures:

Percentage holding = 12% (100,000/833,333 x 100)

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