Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $918,400 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the cormpany. Under the plans for the investment, the VC will hold 16,400 shares in the company and the two entrepreneurs will have combined holdings of 24,600 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?

Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $918,400 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the cormpany. Under the plans for the investment, the VC will hold 16,400 shares in the company and the two entrepreneurs will have combined holdings of 24,600 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?

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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A potential investor is willing to provide S500, 000 in first - round financing with the expectation of a 50% annual compound rate of return over the next five years. Founders currently hold 1,000, 000 million shares of stock. The venture is expected to produce $500,000 in net income in year 5. A similar firm with annual net income of $1,000,000 sold shares to the public for $10,000,000. What is the post- money valuation? a. $499, 954 b. $408, 377 c. $658,436 d. $249,977 (Please provide me with the equation for the BA2 Plus calculator method.)
You are an entrepreneur that founded your IT company three years ago. You invested $100.000 and received 5 million shares of series A stock. Your companyhas been through three additional rounds of financing: Round price number of shares b 0.5 1000000 c 2 500000 d 4 500000 1. What is the Pre-Money Valuation for the series D funding round?2. What is the Post- Money Valuation for the series D funding round?3. Considering that you own the 5 million shares of Serie A round what percentage of the firm you own after serie D round?
CFC is a company that deals with general supplies. The CFO has invited you to a meeting to discuss proposed investment projects for the company. You have been requested to compute the overall cost of capital of the firm as this will be used to evaluate the projects.The following information has been provided to aid in the computation. (i)The company has a cost of equity of 12%, an after-tax cost of debt of 5%, and a cost of preference stock of 10%. (ii) CFC has 10,000 outstanding ordinary shares that are currently trading at Sh.46 per share. (iii) The firm has 5,000 outstanding preference shares issued at a price of Sh.58 a share. (iv) The firm issued 2,000 debentures whose par value is Shs. 105.The current market price is Shs.100. Required: Compute the firm's weighted average cost of capital (WACC).
You founded your firm with a contribution of $700,000, receiving 1,000,000 shares of stock. Since then, you sold 5,000,000 stocks to Angel Investors. Now you are considering raising more capital from a Venture Capitalist. They will invest $7,000,000 and would receive 5,000,000 newly issued shares. What is the post-money valuation? Express the terms of your answer completely and in strictly numerical terms. For example: If your answer is one million dollars, write: 1000000.
Finding the WACC. Monica is the CFO of Cooking for Friends (CFF) and uses the pecking order hypothesis philosophy when she raises capital for company projects. Currently, she can borrow up to $450,000 from her bank at a rate of 7.75%, float a bond for $800,000 at a rate of 10%, or issue additional stock for $1,500,000 at a cost of 15%. What is the WACC for CFF if Monica chooses to invest A. $900,000 in new projects? B. $200,000 in new projects? C. $2,750,000 in new projects?
(EBIT-EPS analysis) A group of retired college professors has decided to form a small manufacturing corporation that will produce a full line of traditional office furniture. The investors have proposed two financing plans. Plan A is an all-common-equity alternative. Under this agreement, 1 million common shares will be sold to net the firm $20 per share. Plan B involves the use of financial leverage. A debt issue with a 20-year maturity period will be privately placed. The debt issue will carry an interest rate of 10 percent, and the principal borrowed will amount to $6 million. The marginal corporate tax rate is 21 percent. a. Find the EBIT indifference level associated with the two financing proposals. b. Prepare a pro forma income statement that proves EPS will be the same regardless of the plan chosen at the EBIT level found in part a. c. Prepare an EBIT-EPS analysis chart for this situation. d. If a detailed financial analysis projects that long-term EBIT will always be close to…
JL Enterprises has 90,000 shares of stock outstanding with a book value of $1,343,000 and a market value of $1,560,000. The firm is considering a project that requires the purchase of $189,000 of fixed assets and has a net present value of $7,500. The project would be all-equity financed through the sale of shares. What will the new book value per share be after the project is implemented?
1- Assume that you are appointed as a finance manager of a FMCG company. How you will design the capital structure of the company if company needs to raise capital from $100,000 to $10,00,000 with the mix of Equity and Debt. Determine the EPS in each case and evaluate the best possible actions for the company 2- During the production process if company needs to raise $ 300,000 more capital then which option suits to company? Through Debt or Equity? Can please someone help me solve this? I dont really know how and my assignment due date is after three hours? please someone help?
Use the following questions to answer Q5 to 07. Hamstrung Electronics Inc. (HEI) has 6 billion shares outstanding and a share price of $15. HEI is considering developing a new product in house at a cost of $500 million. Alternatively, HEI can acquire a firm that already has the technology for $450 million worth (at the current price) of HEI's stock. Suppose that absent the expense of the new technology, HEI will have EPS of 5 0.78. 5. Suppose HEI develops the product in house. What impact would the development cost have on HEI's EPS? Assume all costs are incurred this year and are treated as an R&D expense, HEI's tax rate is 25% and the number of shares outstanding is unchanged. A. EPS will increase by $0.06. B EPS will decrease by $0.06. C. EPS will increase by $0.16. D. EPS will decrease by $0.16. 6. Suppose HEI does not develop the product in house but instead acquires the technology. What effect would the acquisition have on HET's EPS this year? (Note that acquisition expenses…
You are working in the Finance Department of Ranch Manufacturing, and your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase of new packaging equipment for the plant. Under the assumption that the firm’s present capital structure reflects the appropriate mix of capital sources for the firm, you have determined the market value of the firm’s capital structure as follows: Bonds $4,000,000 Preferred stocks $2,000,000 Common Stock $6,000,000 To finance the purchase, Ranch Manufacturing will sell 10-year bonds paying interest at a rate of 7 percent per year (with interest paid semi-annually) at the market price of $1,050. Preferred stock paying a $2.00 dividend can be sold for $25. Common stock for Ranch Manufacturing is currently selling for $55 per share, and the firm paid a $3 dividend last year. Dividends are expected to continue growing at a rate of 5 percent per year for the indefinite future. If the firm’s tax rate is 30…
please answer the question as in attached file asap. thanks
(answer the next 3 questions with the following information.) A fictitious VC firm, EBV, that is considering a series A investment in a start-up company named Newco. The terms specify that EBV invests $5 million for 5M shares into Newco, which currently has 10M shares allotted to employees and founders. Security structure is as follows: First pay [one] times the Original Purchase Price on each share of Series A Preferred. Thereafter, the Series A Preferred participates with the Common Stock pro rata on an as-converted basis. The liquidation return is capped at four times OPP. EBV has committed capital of $100M with 2% management fee. GP% is 10%. If the exit value is $72, how much is the distribution to the VC? O $32M O $27.3 O $24M O $10.7M

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