Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $700,000 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 14,000 shares in the company and the two entrepreneurs will have combined holdings of 21,000 shares. a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.) Valuation of the firm b. What value is the venture capitalist placing on each share? Value of each share

Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $700,000 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 14,000 shares in the company and the two entrepreneurs will have combined holdings of 21,000 shares. a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.) Valuation of the firm b. What value is the venture capitalist placing on each share? Value of each share

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 1fM

See similar textbooks

Similar questions

Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $1,346,400 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 20,400 shares in the company and the two entrepreneurs will have combined holdings of 30,600 shares. a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.) b. What value is the venture capitalist placing on each share?
The startup management is looking to raise venture capital. The pre-money valuation is $10,000,000 with two co-founders holding 40% of the shares each and two investors holding 10% respectively. Now, the platform receives a venture capital injection of $10,000,000. Answer the following questions: i. What is the post-money valuation in $? ii. How much equity does each founder hold in % and $ after the capital injection? iii. How much equity does the venture capital firm hold in % and $ after the capital injection?
Luma, a startup company, provides a platform for people to host virtual classes, record live shows, educate, and find their communities via Zoom. Suppose a founder owns 100% of the startup and currently has 0.5 million shares. The founder plans to raise $3 million from Venick (a venture capital firm investing in technology and healthcare companies) in Series A financing with the pre-money valuation of $10 million. An option pool of 15% is reserved for future employees. Given the information, find the Price/shares paid by Venrock following capitalization table AFTER series A. $2.7 $7.2 $12.5 O $16.1
An entrepreneur first started his business with $100,000. Later, a venture capitalist (VC) agrees to invest $300,000 to sustain the growth. In return, this VC will take up a 50% equity position in the firm. How much is this business worth now? (Show your calculations)
Alex Morgan LLC's Chief Financial Officer, Mackenzie Dern, analyzed one of Morgan's competitors. She found that the competitor had Average Invested Capital of $600,000 in 2021. She said the Company had FCFF of $50,000; FCFE of $40,000; and that their WACC was 10.0%. She asked you what their EVA would be?
Lana is thinking about making an iventment in a new venture called BluePearl - after performing an analysis of similar firms, she discovered several other firms (3) with the following Enterprise Value to FCF ratios: Firm 1: 5.9 Firm 2: 7.6 Firm 3: 9.1 The cashflows for BluePearl this year are expected to be $1,300,000. If BluePearl doesn't have any debt or cash currently, and 700,000 shares outstanding - what is the Price Per Share for BluePearl?
The Dragons (from CBC's Dragon's Den) are considering a venture from an Albertan entrepreneur. His proposal requires the Dragons to invest $500,000 immediately. Based on market conditions, the product is estimated to have year-end profits of $100,000//$200,000//$300,000//$200,000//and finally $100.000. The Dragons will invest only if the internal rate of return exceeds their cost of capital lof 20%. Should they invest?
An investor is considering starting a new business. The company would require $475,000 of assets, and itwould be financed entirely with common stock. The investor will go forward only if she thinks the firm can provide a 13.5% return on the invested capital, which means that the firm must have an ROE of 13.5%. How much net income must be expected to warrant starting the business? Please show work in excel
Suppose that you are appointed as a finance executive of a dairy product Company of UAE. How you will design the capital structure of the company if company needs to raise capital from $200,000 to $8,00,000 with the mix of Equity and Debt. Determine the EPS in each case and evaluate the best possible actions for the company. During the production process if company needs to raise $ 300,000 more capital then which option suits to company? Through Debt or Equity? Justify your answer in context to the theory of financial intermediation to the mistion
An investor is considering starting a new business. The company would require $500,000 of assets, and it would be financed entirely with common stock. The investor will go forward only if she thinks the firm can provide a 15.0% return on the invested capital, which means that the firm must have an ROE of 15.0%. How much net income must be expected to warrant starting the business?
Help
Tim works for HydroTech, a manufacturer of high-pressure industrial water pumps. He reports directly to the CFO, and she has asked him to calculate HydroTech's WACC. He has gathered the following information about HydroTech: its market capitalization (its market value of equity) is $130 million, its beta is 1.2, the total book value of its debt is $40 million, it has $20 million cash, and its cost of debt (using the quoted yields on HydroTech's outstanding bond issues) is 4%. In addition, the yield of the 10-year government bond (the risk-free rate) is 2%, the market risk premium is 4%, and the marginal corporate tax rate is 35%. Calculate HydroTech's WACC. When is it appropriate to use this WACC to evaluate a new project? Calculate HydroTech's WACC. WACC = (Round to two decimal places.) When is it appropriate to use this WACC to evaluate a new project? OA. HydroTech should use this WACC to evaluate projects that are average risk and will be financed in the same ways as HydroTech is…