DEVRY FIN 516 Week 4 Homework
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FIN 516 Week 4 Homework Problem 23-3 on Implied Price of Funding Based on Chapter 23
Starware Software was founded last year to develop software for gaming applications . Initially , the founder invested $ 800,000 and received 8 million shares of stock . Starware now needs to raise a second round of capital , and it has identified an interested venture capitalist . This venture capitalist will invest $ 1 million and wants to own 20 % of the company after the investment is completed .
a ) How many shares must the venture capitalist receive to end up with 20 % of the company ? What is the implied price per share of this funding round ?
b ) What will the value of the whole firm be after this investment ( the post-money valuation )?
Problem 23-4 on IRR of Venture Capital Based on Chapter 23
Suppose venture capital firm GSB partners raised $ 100 million of committed capital . Each year over the 10-year life of the fund , 2 % of this committed capital will be used to pay GSB ’ s management fee .