CFA Practice Question

There are 195 practice questions for this study session.

CFA Practice Question

Shareholders of company X own 100 shares, which is 100% of equity. If an investor makes a $10 million investment into a company X in return for 20 newly issued shares, the implied post-money valuation is:

A. $20 million.
B. $60 million.
C. $100 million.
Correct Answer: B

$10 million*(120/20) = $60 million.

The pre-money valuation is $50 million. The initial shareholders dilute their ownership to 100/120=83.33%.

User Contributed Comments 2

User Comment
vi2009 Post=Pre + Investment

$10million for 20 shares => 1 share = 0.5million
therefore, 100 shares = $50 million

Post = $50 mm + $10 mm = $60mm
Allen88 Nice, thanks vi2009!
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