Why can't I solve POST/PRE/INV problem a different way? problem, valuation, investment, different, currently

laurab

A private equity firm makes a $10 million investment in a portfolio company and calculates that the firm’s investors should hold 1,000,000 shares at a price of $15.00 per share using the IRR approach. The founders of a portfolio company currently hold 300,000 shares. The appropriate post-money (POST) valuation is:

A) $15 million.

B) $19.5 million.

C) $13 million.


Your answer: A was incorrect. The correct answer was B) $19.5 million.

Since we have no information on exit value or the IRR rate, but the share price and number shares held by each party is given, the post-money valuation (POST) is calculated as:

POST = shares price x total number of shares = $15