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melomori [17]
3 years ago
12

Benjamin Garcia's start-up business is succeeding, but he needs $210,000 in additional funding to fund continued growth. Benjami

n and an angel investor agree the business is worth $840,000 and the angel has agreed to invest the $210,000 that is needed. Benjamin presently owns all 37,000 shares in his business.
Required:
What is a fair price per share and how many additional shares must Benjamin sell to the angel?
Business
1 answer:
Dima020 [189]3 years ago
6 0

Answer:

Missing word <em>"Because the stock will be sold directly to an investor, there is no spread; the other flotation costs are insignificant"</em>

<em />

Fair Price is based on the current valuation of business and that is $840,000 in this case.

Fair Price = Current Value of Business/Number of Outstanding Shares

Fair Price = $840,000 / 37,000 shares

Fair Price = 22.7027027

Fair Price = $22.70.

Number of Additional Shares = Additional Funding Required/Fair Price Per Share =

Number of Additional Shares = $210,000 / $22.70

Number of Additional Shares = 9251.101321585903

Number of Additional Shares = 9251 shares

So, since additional funding of $210,000 is required, Benjamin will have to sell 9,251 shares as additional shares to the Angel.

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