The Founders and Owners of a Private Company Have Funded

question 51

Multiple Choice

The founders and owners of a private company have funded it through the following rounds of investment: The owners decide to take the company public through an IPO, issuing 1 million new shares. Assuming that they successfully complete the IPO, the net income for the next year is estimated to be $5 million. The price of shares is set using average price-earnings ratios for similar businesses of 17.0. What portion of the company will be owned by the angel investor after the IPO?

• A)12%
• B)30%
• C)16%
• D)22%

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Definitions:

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