Use the Information for the Question(s)below

question 6

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.
-Assuming that this is the venture capitalist's first investment in your firm,what percentage of the firm will the venture capitalist own?

• A)50%
• B)40%
• C)25%
• D)33%

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Definitions:

Activity-Based Costing

A technique in accounting that allocates expenses to products or services according to the activities and resources utilized in their creation.

Overhead Cost

encompasses indirect expenses related to the production process, such as utilities, rent, and administrative costs.

Product B

A general term used to refer to a specific product or item within a company's lineup, differentiated from other products.

General Factory

A term that might refer to the main production facility where goods are manufactured or assembled, including all related operations.