Person R wants to expand its business by raising $18.3 million through sell of common stock. The business has 50% of debt ratio and family of Person R invested personal wealth into the business. The family wants to retain controlling right. To compute: The spread between the price new investor pays and proceeds to the company, value of sold stock, total post-IPO value of equity, percentage of requirement by new investor along with number of shares and estimated offer price per share.

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Randy’s, a family-owned restaurant chain operating in Alabama, has grown to the point that expansion throughout the entire Southeast is feasible. The proposed expansion would require the firm to raise about $18.3 million in new capital. Because Randy’s currently has a debt ratio of 50% and because family members already have all their personal wealth invested in the company, the family would like to sell common stock to the public to raise the $18.3 million. However, the family wants to retain voting control. You have been asked to brief family members on the issues involved by answering the following questions. What agencies regulate securities markets? How are start-up firms usually financed? Differentiate between a private placement and a public offering.

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Chapter 18, Problem 9MC

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Case summary: Person R wants to expand its business by raising $18.3 million through sell of common stock. The business has 50% of debt ratio and family of Person R invested personal wealth into the business. The family wants to retain controlling right.

To compute: The spread between the price new investor pays and proceeds to the company, value of sold stock, total post-IPO value of equity, percentage of requirement by new investor along with number of shares and estimated offer price per share.

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