- CFA Exams
- CFA Level I Exam
- Study Session 15. Alternative Investments
- Reading 41. Private Equity Valuation
- Subject 2. Valuation characteristics and issues in venture capital vs. buyout
CFA Practice Question
Shareholders of company X own 100 shares, which is 100% of equity. An investor makes a $10 million investment into a company X in return for 20 newly issued shares. In the second round, an investor agrees to make a $20 million for 30 newly issued shares. After two rounds the initial shareholders dilute their ownership to:
A. 50%
B. 66.7%
C. 80%
Explanation: 100/150 = 66.7%.
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