Question

An entrepreneur founded his company using $200,000 of his own money, issuing himself 200,000 shares of stock. An angel investor bought an additional 100,000 shares for $200,000. The entrepreneur now sells another 400,000 shares of stock to a venture capitalist for $1 million. What is the post-money valuation of the company?

Answer 1

the post money valuation of the company is $1,750,000

Step-by-step explanation:

The computation of the post money valuation is shown below:

Given that

Value of 400,000 shares is $1 million.

So,

The Value of 1 share is

= $1 million ÷ 400,000

= $2.5

And,

Total number of shares is

= 400,000 + 200,000 + 100,000

= 700,000

Now

Total value of shares is

= $2.5 × 700,000

= $1,750,000

hence, the post money valuation of the company is $1,750,000