Question

"You founded your firm with a contribution of 5600,000 , receiving 3,000,000 shares of stock. Since then, you sold 12,000,000 stocks to Angei Investors. Now you are considering raising more capital from a venture Capitalist. They will invest 54,000,000 and would receive 90,000,000 newly issued shares. If this is the VC's first investment in the company, what percentage will you own? Note: Express your answers in strictly numerical terms. For example, if the answer is 5 percent, enter 0.05 as an answer."

Answer 1

The student will own a 3.7% of the company.

Step-by-step explanation:

In this case, the student initially founded the firm with a contribution of $560,000 and received 3,000,000 shares of stock. The student later sold 12,000,000 stocks to Angel Investors.

Now, a venture capitalist is investing $54,000,000 and will receive 90,000,000 newly issued shares.

To calculate the percentage of ownership the student will have, we can add up the total shares owned by the student (3,000,000) and subtract the shares sold (12,000,000). The student will own a total of 3,000,000 - 12,000,000 = -9,000,000 shares.

However, since the venture capitalist is receiving 90,000,000 newly issued shares, we can subtract this amount from the student's total shares to obtain the new ownership percentage: -9,000,000 + 90,000,000 = 81,000,000 shares.

The student will then own a percentage of (3,000,000 / 81,000,000) x 100 = 3.7% of the company.