WIMMP Venture Capital
“Where Is My Money” Professional Venture Capital (WIMMP) made a $10 million investment in Bavarian Sausage Technology (BST) 5 years ago and in return received 2.5 million shares of convertible preferred stock that can be converted into 1.5 shares of common stock. After all stock has been converted BST will have 22.5 million shares outstanding. In addition, the company is planning on issuing an additional 5 million shares in an IPO.

-What fraction of BST's common stock will WIMMP own after the IPO?

Question

WIMMP Venture Capital
“Where Is My Money” Professional Venture Capital (WIMMP) made a $10 million investment in Bavarian Sausage Technology (BST) 5 years ago and in return received 2.5 million shares of convertible preferred stock that can be converted into 1.5 shares of common stock. After all stock has been converted BST will have 22.5 million shares outstanding. In addition, the company is planning on issuing an additional 5 million shares in an IPO.

-What fraction of BST's common stock will WIMMP own after the IPO?

Quizplus · Accepted Answer

2.5m(1.5)= 3.75M
3.75/27.5 = .1364

WIMMP Venture Capital “Where Is My Money” Professional Venture Capital (WIMMP) Made a (WIMMP)