Consider the following VC Method Case Founder has 1,000,000 shares of firm. Founder expects to raise two rounds of financing before an exit in 5 years. Exit valuation (TV) at that time is estimated as $100,000,000. Series A funding (today) requires 2M in additional funding, 5 years before exit. Series B funding (after 2 years) requires 5M in additional funding, 3 years before exit. To account for the various risks, use 50% discount rate for the first 2 years, and 30% for the last three years. (a) What is the ownership % to Series A investors after that found. Enter answer as a % to 2 decimal places [1] (b) How many new shares were will be issued to Series A investors after that found. Enter to nearest number of shares. Do not round intermediate results. [2] (c) What is the ownership % to Series B investors after that found. Enter answer as a % to 2 decimal places [3] (d) How many new shares were will be issued to Series B investors after that found. Enter to nearest number of shares. Do not round intermediate results. [4] (e) What s the compounded annual rate of return series A investors will receive if all projections are realized. Enter answer as a % to 2 decimal places. Do not round intermediate results [5]
Consider the following VC Method Case Founder has 1,000,000 shares of firm. Founder expects to raise two rounds of financing before an exit in 5 years. Exit valuation (TV) at that time is estimated as $100,000,000. Series A funding (today) requires 2M in additional funding, 5 years before exit. Series B funding (after 2 years) requires 5M in additional funding, 3 years before exit. To account for the various risks, use 50% discount rate for the first 2 years, and 30% for the last three years. (a) What is the ownership % to Series A investors after that found. Enter answer as a % to 2 decimal places [1] (b) How many new shares were will be issued to Series A investors after that found. Enter to nearest number of shares. Do not round intermediate results. [2] (c) What is the ownership % to Series B investors after that found. Enter answer as a % to 2 decimal places [3] (d) How many new shares were will be issued to Series B investors after that found. Enter to nearest number of shares. Do not round intermediate results. [4] (e) What s the compounded annual rate of return series A investors will receive if all projections are realized. Enter answer as a % to 2 decimal places. Do not round intermediate results [5]
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Consider the following VC Method Case
Founder has 1,000,000 shares of firm.
Founder expects to raise two rounds of financing before an exit in 5 years. Exit valuation (TV) at that time is estimated as $100,000,000.
Series A funding (today) requires 2M in additional funding, 5 years before exit. Series B funding (after 2 years) requires 5M in additional funding, 3 years before exit.
To account for the various risks, use 50% discount rate for the first 2 years, and 30% for the last three years.
(a) What is the ownership % to Series A investors after that found. Enter answer as a % to 2 decimal places [1]
(b) How many new shares were will be issued to Series A investors after that found. Enter to nearest number of shares. Do not round intermediate results. [2]
(c) What is the ownership % to Series B investors after that found. Enter answer as a % to 2 decimal places [3]
(d) How many new shares were will be issued to Series B investors after that found. Enter to nearest number of shares. Do not round intermediate results. [4]
(e) What s the compounded annual rate of return series A investors will receive if all projections are realized. Enter answer as a % to 2 decimal places. Do not round intermediate results [5]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F95ba83ff-7808-49c6-9d62-e3da049fc2e2%2F18d0fcd1-ecc3-4177-96b2-01b94698a843%2Fusl81qd_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the following VC Method Case
Founder has 1,000,000 shares of firm.
Founder expects to raise two rounds of financing before an exit in 5 years. Exit valuation (TV) at that time is estimated as $100,000,000.
Series A funding (today) requires 2M in additional funding, 5 years before exit. Series B funding (after 2 years) requires 5M in additional funding, 3 years before exit.
To account for the various risks, use 50% discount rate for the first 2 years, and 30% for the last three years.
(a) What is the ownership % to Series A investors after that found. Enter answer as a % to 2 decimal places [1]
(b) How many new shares were will be issued to Series A investors after that found. Enter to nearest number of shares. Do not round intermediate results. [2]
(c) What is the ownership % to Series B investors after that found. Enter answer as a % to 2 decimal places [3]
(d) How many new shares were will be issued to Series B investors after that found. Enter to nearest number of shares. Do not round intermediate results. [4]
(e) What s the compounded annual rate of return series A investors will receive if all projections are realized. Enter answer as a % to 2 decimal places. Do not round intermediate results [5]
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