Reference no: EM133040193

Question - AERO Corporation was founded by Mr. Chen. At the beginning of AERO Corporation, Mr.Chen had 10,000 shares of common stock. Mr. Chen wants to develop his business venture with take investors to invest for 5 years.

Mr. Chen estimates that if want reached the terminal value $300,000,000 at the end of the fifth year, then investment funds given by investors is $ 15,000,000. Financing from investors will be done as many as two stages, where the second stage is done in the third year (in the third years, second stage investors will invest their funds in AERO Corporation).

First stage investors demand a rate of return of 70%, while the second stage investors demand rate of return of 50%. Public information shows that competitors of AERO is "SX Corporation" has a market capitalization value of $45,000,000 and obtain net profit of $30,000,000 last year.

Required -

a. Based on the illustration of the case above, do an analysis by calculating the percentage of shares which will be given to first-stage investors and second-stage investors. Give an interpretation for each answer.

b. Based on the answers in point a, do an analysis by calculating the remaining percentage of shares owned by Mr. Chen as a result of the financing carried out by stage investors first and second ,also do analysis by calculating the number of shares outstanding after the occurrence two-stage. Give an interpretation.