Question

brian needs major financing for the educational software company he has founded. he is offering an equity stake of 5% in exchange for an investment of $500,000. at what amount is brian valuing his business?

Answer 1

Brian is valuing his educational software company at $10 million by offering a 5% equity stake in exchange for a $500,000 investment.

Step-by-step explanation:

Brian is valuing his educational software company by offering a 5% equity stake in exchange for a $500,000 investment. To determine the total value of the business, we can set up a proportion where 5% (the equity stake being offered) corresponds to the $500,000 investment. This implies that the full 100% value of the company is represented by the amount that we need to find (the total valuation of the business).

We can write this as follows: 5% (0.05) of the business's total value is $500,000. Therefore, we can express this relationship as: 0.05 × (Total Value) = $500,000

To find the Total Value, we divide both sides of the equation by 0.05: (Total Value) = $500,000 / 0.05 (Total Value) = $10,000,000

Thus, Brian is valuing his business at $10 million.