What is the post-money value of the firms’ equity today?

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
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Use the following given information of Greyhorse Partners to answer the following question. Greyhorse is willing to provide $1.2 million fundings in exchange for a share of the common stock in a firm called Bull-Builders. As this the first-stage financing, Greyhorse’s required rate of return is 50% per year based on a 5-year investment horizon without receiving any cash until the end of this period. Forecast of EBITDA for Bull-Builders in year 5 is $6m. EBITDA multiple of similar firms is 7 times. Bull-Builders’ projected balance sheet at year 5 includes $100,000 in cash and $1m in interest-bearing debt. What is the post-money value of the firms’ equity today? A. $42,000,000 B. $41,100,000 C. $4,212,720 D. $5,412,720
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