I came across this in QBank and I am confused as to what they are doing. It appears that the solution is circular. I’ve commented in a bit more detail below… Management seeks a $12 million investment to fund expansion. Owners have 4m shares, willing to issue 5m more for the investment. A) not do the deal, because the buy-in price is $2.4 million more than the estimated value. B) do the deal, because the buy-in price is $3.0 million below the estimated value. C) do the deal, because the buy-in price is $9.6 million below the estimated value. Step 1: POST = INV / fractional ownership = $12 million / (5 million / 9 million) = $21.6 million. Step 2: Determine PRE PRE = POST − INV = $9.6 million. Since the investment costs $12 million and is worth an estimated $9.6 million, Mixon is paying $2.4 million too much and should not do the deal. -------------------------- From my understand, the Pre is 9.6m and the investment is 12m, which makes a post of 21.6m, which is what the question is finding. It seems to go around in circles and there isn’t enough to answer the Q!!!
this is a bs question discussed here many times b4.