Jones, the investor, proposes taking participating preferred stock1with 1x liquidation preference in return for her $5 million investment. Draw the payoff diagram for this security from Jones’ perspective, assuming she invests $5 million at a pre-money valuation of $14.75 million with no option pool. What is her cash-on-cash return (money received divided by investment) if NewVenture exits in December 2020

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Please provide detailed explanation of your answers. Part A A Venture Capitalist presents Arbuckle, Inc., the shoes manufactu

  1. Jones, the investor, proposes taking participating preferred stock1 with 1x liquidation preference in return for her $5 million investment. Draw the payoff diagram for this security from Jones’ perspective, assuming she invests $5 million at a pre-money valuation of $14.75 million with no option pool.

  2. What is her cash-on-cash return (money received divided by investment) if NewVenture exits in December 2020 at a $150 million valuation?

  3. Thompson, the founder, provides a counter-proposal in which the security will be a standard convertible preferred stock with a liquidation of 2X. Draw the payoff diagram for this security from Jones’ perspective.

  4. If NewVenture exits in December 2020 at a $150 million valuation what would be Jones payoff? which type of a security would Jones prefer? Why?

  5. At what company valuation would the two securities have an equal payout?
     

Related Book For  answer-question

Systems analysis and design

8th Edition

Authors: kenneth e. kendall, julie e. kendall

ISBN: 978-0136089162