If a company asks an investor for an investment of $800,000 in exchange for 15% equity in the business. The implied valuation of the business is: $4,533,333.
First step is to calculate the equity valuation
Using this formula
Equity valuation=Amount invested/Equity rate
Let plug in the formula
Equity valuation=$800,000/.15
Equity valuation=$5,333,333
Second step is to calculate the implied valuation
Implied valuation=Equity valuation-Amount invested
Let plug in the formula
Implied valuation=$5,333,333-$800,000
Implied valuation=$4,533,333
Therefore If a company asks an investor for an investment of $800,000 in exchange for 15% equity in the business. The implied valuation of the business is: $4,533,333.
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