Question

Benjamin Garcia's start-up business is succeeding, but he needs $207,000 in additional funding to fund continued growth. Benjamin and an angel investor agree the business is worth $828,000 and the angel has agreed to invest the $207,000 that is needed. Benjamin presently owns all 43,000 shares in his business. Because the stock will be sold directly to an investor, there is no spread; the other flotation costs are insignificant.

What is a fair price per share? Do not round intermediate calculations. Round your answer to the nearest cent.

$

How many additional shares must Benjamin sell to the angel? Do not round intermediate calculations. Round your answer to the nearest whole number.

shares

Answer 1

Solution :-

Fair Price is based on the current valuation of business which in this case is given as $828,000.

Fair Price = Current Value of Business/Number of Outstanding Shares = 828,000 / 43,000 = $19.256 per share

Number of Additional Shares Sell to Angel = Additional Funding Required/Fair Price Per Share = 207,000 / 19.256 = 10,750 Shares

Since additional funding of $207,000 is required, Benjamin will have to issue = 207,000 / 19.26 = 10,750 shares additional shares to the angel investor.

Shares issue 10,750 @ 19.26 per share

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