CA Final · Advanced Financial Management · Startup Finance
Kaveri Tech, a startup, has 8,00,000 shares held by founders before a funding round. An angel investor invests Rs 2 crore at a pre-money valuation of Rs 8 crore. How many new shares must be issued to the investor?
The company must issue 2,00,000 new shares. Pre-money value of Rs 8 crore over 8,00,000 existing shares gives Rs 100 per share, so Rs 2 crore buys 2,00,000 shares. This equals a 20% post-money stake, consistent with Rs 2 crore over Rs 10 crore.
- A2,00,000 sharesCorrect
- B2,66,667 shares
- C2,50,000 shares
- D1,60,000 shares
Explanation
Price per share = pre-money 8,00,00,000 / 8,00,000 = Rs 100. New shares = 2,00,00,000 / 100 = 2,00,000. Check: investor holds 2,00,000/10,00,000 = 20%, equal to 2/(8+2) post-money. Rs 2,50,000 wrongly uses 25% (2/8) as the stake.
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