You Founded Your Own Firm Three Years Ago

question 14

Multiple Choice

You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 3 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. After the venture capitalist's investment, the post-money valuation of the angel investor's shares is closest to ________.

• A) $12.5 million
• B) $4.0 million
• C) $5.0 million
• D) $2.5 million

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Definitions:

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit columns to ensure a company's bookkeeping system is mathematically correct.

Journalized

The process of recording financial transactions in a journal before they are posted to ledger accounts.

Trial Balance

A financial statement that lists all the balances of a company's general ledger accounts at a specific point in time, ensuring that debits equal credits.

Transactions

Actions or activities conducted by a company that affect its financial statements, such as sales, purchases, and payments.