David founds a company and goes through the investment rounds shown below: $$\begin{array} { l l c c }
\text { Round } & \text { Source } & \text { Price } & \text { Number of Shares } \
\hline \text { Class A } & \text { Self } & \$ 0.50 & 400,000 \
\text { Class B } & \text { Angel } & \$ 1.00 & 500,000 \
\text { Class C } & \text { Venture Capital } & \$ 1.50 & 300,000 \
\text { Class D } & \text { Venture Capital } & \$ 2.25 & 400,000
\end{array}$$ He decides to take the company public through an IPO, issuing 2 million new shares. Assuming that he successfully completes the IPO, the net income for the next year is estimated to be $8 million. His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses, which is 15.0. What share of the company will David own after the IPO?

Question

David founds a company and goes through the investment rounds shown below: $$\begin{array} { l l c c } 
\text { Round } & \text { Source } & \text { Price } & \text { Number of Shares } \
\hline \text { Class A } & \text { Self } & \$ 0.50 & 400,000 \
\text { Class B } & \text { Angel } & \$ 1.00 & 500,000 \
\text { Class C } & \text { Venture Capital } & \$ 1.50 & 300,000 \
\text { Class D } & \text { Venture Capital } & \$ 2.25 & 400,000
\end{array}$$ He decides to take the company public through an IPO, issuing 2 million new shares. Assuming that he successfully completes the IPO, the net income for the next year is estimated to be $8 million. His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses, which is 15.0. What share of the company will David own after the IPO?

Quizplus · Accepted Answer

The Answer of David founds a company and goes through the investment rounds shown below: $$\begin{array} { l l c c } 
\text { Round } & \text { Source } & \text { Price } & \text { Number of Shares } \
\hline \text { Class A } & \text { Self } & \$ 0.50 & 400,000 \
\text { Class B } & \text { Angel } & \$ 1.00 & 500,000 \
\text { Class C } & \text { Venture Capital } & \$ 1.50 & 300,000 \
\text { Class D } & \text { Venture Capital } & \$ 2.25 & 400,000
\end{array}$$ He decides to take the company public through an IPO, issuing 2 million new shares. Assuming that he successfully completes the IPO, the net income for the next year is estimated to be $8 million. His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses, which is 15.0. What share of the company will David own after the IPO?

David Founds a Company and Goes Through the Investment Rounds