Amazon first funding round. It needs an investment of USD 9 million. Peter Lynch, an investor, agrees to a price of USD 12 per share. Ben and Jess, the founders of Amazon, own 800,000 shares. Show working for relevant formula.

1. The number of shares issued?

2. What is the pre-money valuation of Amazon?

3. What is the post-money valuation of Amazon?

4. Now assume that a second investor, Jeff, has a higher required rate of return than the first investor. Would they offer a higher or lower pre-money valuation? Why?

5. What is the insight behind the result in part 4?  

Answer rating: 100% (QA)

Number of shares issued to Peter Total money invested Rate per share USD 9 Million USD 12 750000 So ... View the full answer