Use the Information for the Question(s) Below

question 49

Multiple Choice

Use the information for the question(s) below.
You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you
received 2 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are
now considering raising capital from a venture capital firm. This venture capital firm would invest $5 million and would
receive 2 million newly issued shares in return.
-Suppose you sold the 1 million shares to the angel investor for $500,000. What was the post-money valuation of your shares immediately following the angel investor's investment?

• A) $500,000
• B) $2.5 million
• C) $1.0 million
• D) $2.0 million

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Definitions:

Net Operating Income

The profit generated from a company’s everyday business operations, calculated by subtracting operating expenses from revenue.

Minimum Required Rate

The lowest rate of return or discount rate acceptable for a project or investment to proceed.

Residual Income

Residual Income (RI) is the net income an organization generates beyond the minimum rate of return on its investments.

Operating Assets

Assets that are used in the day-to-day operations of a business to generate income, including both current and long-term assets.