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q3 q4 Mr. Pied and Ms. Piper co-found an exciting, high growth startup (Erlich Solutions)....

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Question

Finance

q3 q4

Mr. Pied and Ms. Piper co-found an exciting, high growth startup (Erlich Solutions). They each invest $1000 of their hard earned money to get the business started and each get 1,000,000 founders shares in exchange for that initial investment, and an oath from the other that they are all-in on the business. After a year scraping by, they believe they have developed enough to raise money from some friends, family, and/or fools. With a great pitch about the future, and some exciting milestones regarding customer traction, the co-founders convince their Aunt Sue and Uncle Hugh, to each invest $50,000 with each receiving 10% equity in exchange for their investment.

shareholder

% shareholding

shares owned

valuation

Mr pied

40%

1000000

200000

Mrs pied

40%

1000000

200000

Aunt sue

10%

250000

50000

Uncle Hugh

10%

250000

50000

100%

2500000

500000

Question:

Before any more investors are needed, Erlich Solutions' founders get acqui-hired for $8M. How much money (pre-tax) do each of the founders take home?

a) $4M

b) $6M

c) $3.2M

d) $0.5M

e) $8M

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