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:

SEC Regulations

Rules and guidelines established by the Securities and Exchange Commission (SEC) to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Private Investors

Individuals or entities that invest their own capital in various financial instruments or businesses, aiming for personal profit.

Private Partnerships

Agreements or collaborations between private entities or individuals for business purposes, often structured to achieve specific goals or projects.

Wealthy Investors

Individuals or entities with significant amounts of capital to invest, often looking for tailored financial advice and specialized investment products.