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Pricing Stock Issues Benjamin Garcia's start-up business is succeeding, but he needs $207,000 in additional funding...

Pricing Stock Issues

Benjamin Garcia's start-up business is succeeding, but he needs $207,000 in additional funding to fund continued growth. Benjamin and an angel investor agree the business is worth $828,000 and the angel has agreed to invest the $207,000 that is needed. Benjamin presently owns all 37,000 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

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Answer:

Total Value of Business = $828,000

Number of Outstanding share = 37,000

a.

Fair Price per share is calculated below:

Fair price per share = $828,000/37,000

= $22.38

Hence, Fair Price per share is $22.38

b.

Company requires additional $207,000 for expansion.

Fair Price of stock = $22.38

So total number of Share Company should issue to raise $209,000 is calculated below:

Number of New share = $207,000/$22.38

=9250

Hence, total number of Share Company should issue to raise $207,000 is 9250.

jeff jeffy answered 2 years ago

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