Stack is a privately held programming company that is developing software for functional programming.After a period of strong growth, it has revenues of $25m and EBITDA of $2.5m. After some internaldiscussions they decide to find a VC to provide growth capital and are wondering about what valuationthey could reach. Stack has not raised any external debt or equity to date. You are part of the businessdevelopment team and the founders have asked you to do some initial calculations to help them withnegotiations. You look at some firms listed on the NASDAQ and find one which is similar to Stac

To determine a valuation for Stack, we can use the comparable company analysis (CCA) method.Identify…

eriod of strong growth, it has revenues of $25m and EBITDA of ons they decide to find a VC to provide growth capital and are wo Id reach. Stack has not raised any external debt or equity to date ment team and the founders have asked you to do some initial ca

eriod of strong growth, it has revenues of $25m and EBITDA of ons they decide to find a VC to provide growth capital and are wo Id reach. Stack has not raised any external debt or equity to date ment team and the founders have asked you to do some initial ca

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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URGENT PLEASE d. Calculate the firm's weighted average cost of capital using the capital structure weights shown in the following table . (Round answer to the nearest 0.01%)
tol Processing ng Help Save & Exit Submit Saved Practice Problems i Check my work Eaton Electronic Company's treasurer uses both the capital asset pricing model and the dividend valuation model to compute the cost of common equity (also referred to as the required rate of return for common equity). Assume: Rf = 7% Km 10% = 1.6 D1 = $ 0.70 $ 19 8% %3D PO = nt a. Compute Ki (required rate of return on common equity based on the capital asset pricing model). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) ences Ki b. Compute Ke (required rate of return on common equity based on the dividend valuation model). (Do not round intermediate calculations, Input vour answer as a percent rounded to 2 decimal places.) < Prev 10 of 10 Next Mc Graw Hill 149 MacBook Air
EX_1. A venture capitalist is considering investing in several projects. You have researched several possibilities for her and come up with the following cash flow estimates. Which investment should you recommend for the venture capitalist to choose? First-Year Growth Cost of Сaptal Initial Project Investment Cash Flow Rate Dating App $250,000 $5,000 4% 7% Green $350,000 $75,000 4% 8% Energy Water $400,000 $120,000 5% 8% Purification "Smart" Clothes $500,000 $125,000 8% 12%
Hamada equation Original % debt in capital structure, wd Original % common equity in capital structure, wc Risk-free rate, TRF Market risk premium, RPM Tax rate, T Firm's cost of equity, rs Calculation of firm's current beta: Firm's current beta, b Calculation of firm's unlevered beta: Firm's unlevered beta, bu New % of debt in capital structure, Wd New New % of common equity in capital structure, Wc New Calculation of firm's new beta: Firm's new beta, bL New Calculation of firm's new cost of equity: Firm's new cost of equity, rs New 30.00% 70.00% 5.00% 7.00% 40.00% 14.00% 50.00% 50.00% Formulas #N/A #N/A #N/A #N/A
Sub : FinancePls answer very fast.I ll upvote CORRECT ANSWER . Thank You( Dnt use CHATGPT ) If a business unit generated $3,600,000 in BEFORE TAX PROFIT and had invested capital of $18,000,000 BUT had excellent terms with its suppliers so had CREDITORS of $2,000,000 and the Weighted Average Cost of Capital (WACC) for this business is 16%. Calculate the Economic Value Add (EVA) for this business unit and select which of the following is correct. (Assume a tax rate of 30%) Positive $40,000 - performance is acceptable because EVA is greater than zero and therefore adding value b. $2,520,000 Acceptable because EVAt is greater than zero c. Negative $40,000 unacceptable because EVA is less than zero d. $2,560,000 acceptable because EVA is greater than zero
Labrador technologies Inc. plans to become public soon. The board of directors would like to know the value of common equity and have asked for your opinion. The firm has $1,249,917 in preferred equity and the market value of its outstanding debt equals $2,049,396. The WACC for this firm is estimated to be 8.92%. For this example assume the current assets are zero. Use the DCF valuation model with the expected FCFs shown below; year 1 represents one year from today and so on. The company expects to grow at a 3.0% rate after Year 5. Rounding to the nearest penny, what is the value of common equity? Free Cash Period Flow Year 1 $1,370,274 Year 2 $1,761,479 Year 3 $1,909,652 Year 4 $2,361,090 Year 5 $2,744,645
A firm's financial managers are evaluating two potential investments with a cost of $10,000 each. They forecast returns of $3,000 per year for 5 years for Investment A and $4,000 per year for 5 years for Investment B. The returns are more uncertain for B than for A. Which of the following is true? Investment A is better than B according to shareholder wealth maximization criterion. Investment B is better than A according to shareholder wealth maximization criterion. Investment A is better than B according to the profit maximization criterion. Investment B is better than A according to the profit maximization criterion.
Review this situation: Universal Exports Inc. is trying to identify its optimal capital structure. Universal Exports Inc. has gathered the following financial information to help with the analysis. Debt Ratio 30% 40% 50% 60% 70% Equity Ratio 70% 60% 50% 40% 30% Id 7.00% 7.20% 7.70% 11.40% 8.90% 12.20% 10.30% 13.50% Is WACC 10.50% 8.61% 10.80% 8.21% 8.01% 8.08% 8.38% Which capital structure shown in the preceding table is Universal Exports Inc.'s optimal capital structure? Debt ratio = 70%; equity ratio = 30% Debt ratio 50%; equity ratio = 50% Debt ratio = 30%; equity ratio = 70% Debt ratio = 40%; equity ratio = 60% Debt ratio= 60%; equity ratio = 40%
Rachel the chief financial officer of sunrise fruit snakcs, needed to determine the compnays projected cost of capital for next year, to do so , wshe needed to know the following infomraiont expect a) the proejcted equity level for next year b) the projected intereset rate on next years debt The projected debt level for next year D0 the projected cash balance for next year
Based on the following information you have collected, what is the sustainable growth rate (SGR) for Leo's Photography Studio? Profit Margin Debt/Equity Ratio Capital Intensity Ratio Net Income Dividends O A. O B. O C. O D. 12.42% 8.52% 15.15% 13.63% 7.1% 0.60 0.75 $48,000 $10,000

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