Asked by Kristina Aponte on Feb 18, 2024
Verified
An entrepreneur is asking for $1 million for 30% of his company.What is the entrepreneur's post-money valuation?
A) $3.33 million
B) $300,000
C) $2 million
D) it cannot be determined
Entrepreneur
An individual or a group who creates something new—a new idea, a new item or product, a new institution, a new market, a new set of possibilities.
- Understanding the concept of post-money valuation in relation to equity investment.
- Ability to calculate the post-money valuation based on the given information.
- Knowledge of the relationship between the amount of investment and the percentage of ownership in a company.
Verified Answer
MH
Madison HaumschildFeb 18, 2024
Final Answer :
A
Explanation :
The post-money valuation is calculated as the total value of the company immediately after receiving the investment. If the entrepreneur is giving away 30% of the company for $1 million, it means that 30% is valued at $1 million. Therefore, to find the total (post-money) valuation, you divide the investment amount by the percentage (in decimal form), i.e., $1 million / 0.30 = $3.33 million.
Learning Objectives
- Understanding the concept of post-money valuation in relation to equity investment.
- Ability to calculate the post-money valuation based on the given information.
- Knowledge of the relationship between the amount of investment and the percentage of ownership in a company.
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