David Found a Company and Goes Through the Investment Rounds

question 88

Multiple Choice

David found a company and goes through the investment rounds shown below: Round Source Price Number of Shares
Series A Self $0.50 375,000
Series B Angel $1.00 400,000
Series C Venture Capital $1.50 250,000
Series D Venture Capital $2.25 400,000
He decides to take the company public through an IPO, issuing 2 million new shares. Assuming that he successfully completes the IPO, the net income for the next year is estimated to be $9 million. His banker informs him that the price of shares should be set using average price-earnings ratios for similar businesses, which is 14. What will be the IPO price per share?

• A)$3.68
• B)$22.07
• C)$36.79
• D)$68.06

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Definitions:

Independence

The state or quality of being self-sufficient and free from outside control, making decisions without undue influence from others.

Physiological

Pertaining to the branch of biology that deals with the normal functions of living organisms and their parts.

Self-actualization

The realization or fulfillment of one's talents and potentialities, considered as a drive or need present in everyone.

Belonging

A sense of acceptance and support within a group or environment, often leading to feelings of security and community.