d) Assume the preferred stock is participating. At an exit value of $20,000,000, what is the payoff to the common stockholders (i.e. Founders & Management)? e) If the VC owned non-participating convertible preferred stock with a 2x liquidation preference at what exit value is the VC indifferent between either converting or not converting?
d) Assume the preferred stock is participating. At an exit value of $20,000,000, what is the payoff to the common stockholders (i.e. Founders & Management)? e) If the VC owned non-participating convertible preferred stock with a 2x liquidation preference at what exit value is the VC indifferent between either converting or not converting?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter15: Contributed Capital
Section: Chapter Questions
Problem 5MC
Related questions
Question
Pls answer d and e using info in screenshot
Transcribed Image Text:Caleb Clark Ventures invests $4 million in convertible preferred stock in a company with
an $12 million pre-money valuation. The term sheet shows the investment is non-
participating with 1x liquidation preference.
Transcribed Image Text:d) Assume the preferred stock is participating. At an exit value of $20,000,000, what
is the payoff to the common stockholders (i.e. Founders & Management)?
e) If the VC owned non-participating convertible preferred stock with a 2x liquidation
preference at what exit value is the VC indifferent between either converting or not
converting?
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