Question: Starware Software was founded last year to develop software for gaming applications. The founder initially invested $700,000 and received 9 million shares of stock. Starware

Starware Software was founded last year to develop software for gaming applications. The founder initially invested

$700,000 and received 9 million shares of stock. Starware now needs to raise a second round ofcapital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $1.60 million and wants to own 20% of the company after the investment is completed.

a. How many shares must the venture capitalist receive to end up with 20% of thecompany? What is the implied price per share of this fundinground?

b. What will the value of the whole firm be after this investment(the post-moneyvaluation)?

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