FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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am. 366.

a
Convertible Preferred shares with 2X liquidation preference
The founders of the start-up need additional capital to expand the business and they arrange an
"A" of financing with a venture capital firm that agrees to provide $4,000,000 in exchange for 40%
ownership; however, to invest in the start-up the Series "A" investors require Convertible Preferred
shares a 2X liquidation preference and the shares have senior priority in receiving all proceeds from
a sale or liquidation. The original investment amount is $4,000,000
Owners/Investors Security Shares Percent Investment
Founders
Series A
Question 46
Common 6,000,000 60%
Convertible
Preferred
4,000,000 40%
Share
Price
$100,000 $0.0167
If the company were sold for $24,000,000
Investors versus founders
$4,000,000 $1.00
How much money would the Series A investors receive? $
How much money would the founders receive?
$
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Transcribed Image Text:a Convertible Preferred shares with 2X liquidation preference The founders of the start-up need additional capital to expand the business and they arrange an "A" of financing with a venture capital firm that agrees to provide $4,000,000 in exchange for 40% ownership; however, to invest in the start-up the Series "A" investors require Convertible Preferred shares a 2X liquidation preference and the shares have senior priority in receiving all proceeds from a sale or liquidation. The original investment amount is $4,000,000 Owners/Investors Security Shares Percent Investment Founders Series A Question 46 Common 6,000,000 60% Convertible Preferred 4,000,000 40% Share Price $100,000 $0.0167 If the company were sold for $24,000,000 Investors versus founders $4,000,000 $1.00 How much money would the Series A investors receive? $ How much money would the founders receive? $
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