Answer to Question #285750 in Economics of Enterprise for Charlton

Question

36. What would be an investor’s equity ownership stake in a technology venture given the following information:

• Pre-money valuation: $1.2 million

• Investor share purchase: $300,000

• What is the post-money valuation of this venture?

37. Explain the main differences between debt and equity financing. How does a lender, such as a bank, control the operations of a technology venture to which it lends money?

38. If a technology venture has net profits of $2 million, in an industry where other firms like it have been acquired for amounts equivalent to four times net profit, what is the value of the venture?

Answer 1

36.

Post money valuation

$Pre- valuation =\$1200000\\$

$Valuations=\$300000÷25\%=\$1200000\\ \$1200000+300000=\$1500000$

37) equity financing is the process of raising capital through the sale of shares in a company whereas debt financing is selling of debt instruments and there is interest on principal and principal payment on debt received.

Controls the organization by example appointing a director given the stake received

38)

$\$2m \times 4=\$8m$