1) Star Software was founded last year to build up software for gaming applications. Initially, founder invested= $800,000 and got 8 million shares of stock. Star now requires raising second round of capital, and it has recognized the interested venture capitalist. This venture capitalist will invest= $1 million and wishes to own 20% of company after investment is finished.
a) How many shares should venture capitalist receive to end up with 20% of the company? Determine the implied price per share of this funding round?
b) Determine the value of whole firm be after this investment (the post-money valuation)?
2) Assume that risk-free rate is presently 9% per annum (quoted as an APR). You read of a strange security which offers risk-free payoff of $10 per month for the next five years. Then, exactly one year after final $10 payment, investment will make first of 5 annual payments in amount of= $100 each. Determine the most that the investor must be willing to pay for this security at this moment (one month before first payoff)? At what price must the security sell after one year of monthly payments has elapsed?