- 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. The post-money valuation after round 2 is:
A. $30 million.
B. $80 million.
C. $100 million.
Explanation: $20 million*(150/30)=$100 million. The pre-money valuation is $100-$20=$80 million.
User Contributed Comments 1
| User | Comment |
|---|---|
| vi2009 | After round 2, total number of shares = 100 + 20 + 30 = 150 At round 2, 30 new shares for $20million. 150 / 30 *$20million = $100million (by proportion ... ) |