Calculating Equity in Company A: 1.2% for $600,000.00

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Discussion Overview

The discussion revolves around calculating the investment required for a customer to acquire 1.2% equity in Company A, specifically through purchasing shares in Company C, which holds 60% of Company A's total value. The conversation includes considerations of equity distribution between Company B and Company C and the implications for the customer's investment.

Discussion Character

  • Mathematical reasoning
  • Debate/contested

Main Points Raised

  • One participant states that 1.2% of Company A’s value of $50,000,000 is $600,000, questioning the relevance of Company C’s equity in this calculation.
  • Another participant clarifies that the customer intends to invest only in Company C and seeks to determine the necessary amount to invest in C to achieve the desired equity in A.
  • A further reply reiterates that purchasing $600,000 of equity from Company C still represents 1.2% of Company A, suggesting that the equity shares held by Company B do not affect this calculation.
  • One participant shares personal experience regarding financial management and accounting, indicating a lack of clarity in financial dealings, though this is not directly related to the equity calculation.
  • Another participant interprets the customer's intent as wanting to buy only a share of Company C and calculates that to acquire 1.2% of Company A, the customer must buy 2% of Company C, based on its valuation of $30,000,000.

Areas of Agreement / Disagreement

Participants express differing views on the relevance of Company C's equity in the context of the investment calculation. While some agree on the calculation of 1.2% of Company A's value, there is no consensus on how the equity distribution between Companies B and C impacts the customer's investment strategy.

Contextual Notes

There are unresolved assumptions regarding the implications of equity distribution between the two companies and how that affects the investment calculation. The discussion also reflects varying levels of understanding of financial concepts among participants.

Confused00901
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Company A’s value is stated at $50,000,000.00 the company is set up into 2 separate entities Company B with 40% equity and Company C with 60% equity. If a customer wants to own 1.2% of Company A, but only wants to hold part of Company C at 60%, how much would the customer have to spend to buy 1.2% of Company A?
 
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1.2% of Company A’s value of 50 million is 600,000

not clear what Company C’s equity of 30 million has to do with that 1.2%
 
They only want to buy into Company C, and not Company B. So what amount do they have to pay to invest in C since that company holds 60%?
 
Confused00901 said:
They only want to buy into Company C, and not Company B. So what amount do they have to pay to invest in C since that company holds 60%?

Purchasing 600,000 of equity from company C is still 1.2% of company A since C is contained within A.
Still not seeing how the equity shares of A held by B and C make any difference.
 
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I'll ask the accountant that question. Even though I own a business, I've never been involved in the money side of the business. This may have caused me to go bankrupt last year. I can't 100% blame the person who did all the accounting, but he should have warned me about possible financial difficulties. I had to consult with antonybatty.com for a month to restart the business successfully. Now I also work in the accounting industry, but it has become more difficult with the start of inflation worldwide.
 
I am interpreting he "only wants to hold part of Company C at 60%" to mean that he wants to buy only a share of company C, none of company B.

Company A is worth \$50,000,000. Company C is worth 60% of that, \$30,000,000. 1.2% of \$50,000,000 is \$600,000. He must buy $\frac{600000}{30000000}= 0.02$ or 2% of company C.
 

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