Pricing Stock Issues
Benjamin Garcia's start-up business is succeeding, but he needs $191,000 in additional funding to fund continued growth. Benjamin and an angel investor agree the business is worth $764,000 and the angel has agreed to invest the $191,000 that is needed. Benjamin presently owns all 38,000 shares in his business. Because the stock will be sold directly to an investor, there is no spread; the other flotation costs are insignificant.
What is a fair price per share? Do not round intermediate calculations. Round your answer to the nearest cent.
$
How many additional shares must Benjamin sell to the angel? Do not round intermediate calculations. Round your answer to the nearest whole number.
shares
Since the business is worth $764,000, therefore, for 38,000 shares, the fair price per share would be 764,000/38,000 = $20.11
To raise $191,000 at 20.11 per share, Benjamin must sell 191,000/20.11 = 9497.762307 that is 9498 shares to the angel.
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