You Founded Your Own Firm Three Years Ago

question 91

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 2 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 4 million newly issued shares in return. Suppose you sold the 2 million shares to the angel investor for $500,000. What was the post-money valuation of your shares immediately following the angel investor's investment?

• A) $500,000
• B) $0.75 million
• C) $1.5 million
• D) $1.9 million

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Definitions:

Equity Market

A financial market where shares of companies are issued and traded, also known as the stock market.

World Equity Market

A global marketplace where shares of companies from different countries are bought and sold.

Correlations

A statistical measure that describes the extent to which two variables change together, indicating the strength and direction of their relationship.

Stock-Index Portfolios

Investment portfolios that aim to replicate the performance of a specific stock index, allowing investors to gain broad market exposure.