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hw6_solutions - 1.2 25,000 shares out of 1,000,000 is 2.5...

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SOLUTIONS FOR HW 6 JACOB LYLES The following are example solutions for HW 6. I also accepted other answers that were well-argued and demonstrated an understanding of the problem. 1 1.1. Assuming that the 1 million shares comprise all the shares outstanding after the transaction (as is common in a Series A), the post-money valuation is $5 million. The answer to this question depends on the email clarification I sent out, so I also accepted the answer $3 million which could be argued if someone did not read my clarification.
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Unformatted text preview: 1.2. 25,000 shares out of 1,000,000 is 2.5% of the company. 2.5% of $40 million is $1 million, however the problem states that you paid $0.10 per share for the shares (or $2,500), so your net gains are $997,500. 1.3. Assuming the new investment is at par, the post-money valuation is $15 million. 8.0% of $10 million is 5.3% (repeating, of course) of $15 million. 1.4. 5.33% (repeating) of $60 million is equivalent to 8.0% of $40 million, $3.2 million in each case. 1...
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