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How many shares do you receive

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Question - Suppose you hold all of the $9.99 million in convertible notes in a start-up (this includes accrued Interest). Your note has a $13 million cap and a 20% discount.

There are 3 million founders' shares and the option pool contains an additional 3 million shares. A VC is making an A-round investment and requires 25% of the exit value of the firm. (There are no future financing rounds). The VC is investing $11 million and requires a 50% return (annually). The firm will exit in 3 years.

Required -

a. How many shares do you (the note holder) receive if you convert using the cap?

b. How many shares does the VC need to secure the required 25% ownership stake?

Reference no: EM133077313

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