A Potential Investor Is Willing to Provide $500,000 in First-Round

question 51

Multiple Choice

A potential investor is willing to provide $500,000 in first-round financing with the expectation of a 50% annual compound rate of return over the next five years. Founders currently hold 1,000,000 million shares of stock. The venture is expected to produce $500,000 in net income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for $10,000,000. What is the pre-money valuation?

• A)$120,300
• B)$316,800
• C)$158,400
• D)$193,900

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Definitions:

Ordinary Bailment

A legal relationship where one party (the bailor) transfers physical possession of personal property to another party (the bailee) for a specific purpose, without transferring ownership.

Rights and Liabilities

Legal entitlements and obligations that individuals or entities possess in a legal agreement or under the law.

Party

An individual or entity involved in a legal agreement or dispute.

Ordinary Bailment

A legal relationship where physical possession of personal property is transferred from one person to another, but ownership is not.