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What is the market value of existing shareholders

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In this assignment we consider a third option in which the new startup raises money via a combination of debt and equity. Specifically, suppose that to raise the $80 that is needed for the initial investment, they borrow $30, and raise the other $50 by issuing equity.

a. After they raise the money: What is the market value of the new equity raised? What is the market value of existing shareholders equity? What is the total market value of equity?

b. What ownership stake will the new shareholders require? (Hint: You should obtain that the answer is 26.32%)

c. Fill in the following table, showing the cash flows next year. (You can construct this table with Excel.)

Reference no: EM133061553

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