Question: Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $400,000 to support its expansion plans. A venture capitalist is

Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $400,000 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 10,000 shares in the company and the two entrepreneurs will have combined holdings of 15,000 shares.

a. What is the total after-the-money valuation of the firm?

b. What value is the venture capitalist placing on each share?

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