You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 3 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $4 million and would receive 3 million newly issued shares in return. Suppose you sold the 1 million shares to the angel investor for $500,000. What was the post-money valuation of your shares immediately following the angel investor's investment?

You founded your own firm three years ago. You initially contributed $200,000 of your own money and in return you received 3 million shares of stock. Since then, you have sold an additional 1 million shares of stock to angel investors. You are now considering raising capital from a venture capital firm. This venture capital firm would invest $4 million and would receive 3 million newly issued shares in return. Suppose you sold the 1 million shares to the angel investor for $500,000. What was the post-money valuation of your shares immediately following the angel investor's investment?

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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You are a Financial Investment Counselor, and you have several clients who are working for a very successful technology company. Combined they have millions of dollars invested stock options, which are substantially in the money. You have warned them to some extent about the dangers of keeping all their assets in a single stock, and their reprise is that what other stock or portfolio could possibly give them the 40% annual return they have been receiving on their company's stock in the last two years. How would you reply, remember these are vested options but not yet exercised.
Joy wants to invest his funds in shares in one of the two existing manufacturing companies. The following information about the dividend paid during the seven years of the Year Brown Company Avel Company 2000 500 300 2001 600 557 2002 665 615 2003 675 640 2004 785 790 2005 800 815 2006 815 795 If you as an investment consultant who is conducting an analysis of the two companies, with Using trend analysis, which company would you recommend to Joy for his investment in 2010? (work with complete procedure)
6. Venture Capital. Here is a difficult question: Pickwick Electronics is a new high-tech company financed entirely by 1 million ordinary shares, all of which are owned by George Pickwick. The firm needs to raise $1 million now for stage 1 and, assuming all goes well, a further $1 million at the end of 5 years for stage 2. First Cookham Venture Partners is considering two possible financing schemes: ∙ Buying 2 million shares now at their current valuation of $1. ∙ Buying 1 million shares at the current valuation and investing a further $1 million at the end of 5 years at whatever the shares are worth. The outlook for Pickwick is uncertain, but as long as the company can secure the additional finance for stage 2, it will be worth either $2 million or $12 million after completing stage 2. (The company will be valueless if it cannot raise the funds for stage 2.) Show the possible payoffs for Mr. Pickwick and First Cookham, and explain why one scheme might be preferred. Assume an interest…
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Your stockbroker, John Smith, calls you with a hot stock tip to buy SMITH Inc. The stock is currently selling for $25 a share. You gather the following data to evaluate Smith's recommendation. The risk free rate is 3%, and you demand a 14% return on the market portfolio. SMITH's current dividend is $2.50 a share. You decide to get other necessary estimates from a third-party, Rocky Enterprises. Rocky has estimated that SMITH's beta is 2.0 and that the stock's dividend will grow at a constant 10 percent rate. Based on your estimates, is Smith's recommendation to buy SMITH a good one? What do you think the stock is worth?
2. An analyst for Acme, R. Runner, has recommended that Peter the Anteater purchase shares in a private firm (a firm that is not traded on any exchange) called Dynamite Corp. Dynamite has 30% debt and 70% equity. R. Runner believes that Dynamite will generate a return of 10% over the next year. Since Y. Lee is new to the job, he decides to do a little research on his own. He finds a company, Explosions Unlimited, that has very similar business as Dynamite. Explosions has an equity beta of 1.05 and is composed of 40% debt and 60% equity. Should Peter the Anteater buy the stock? The expected return on the market is 12% and the expected risk-free rate is 5%.
You are considering how to invest part of your retirement savings.You have decided to put$100,000 into three stocks: 55% of the money in GoldFinger (currently $24/share),23%of the money in Moosehead (currently$85/share),and the remainder in Venture Associates (currently $3/share).Suppose GoldFinger stock goes up to $33/share, Moosehead stock drops to $66/share, and Venture Associates stock rises to $5 per share. a. What is the new value of the portfolio? b. What return did the portfolio earn? c. If you don't buy or sell any shares after the price change, what are your new portfolio weights?
A big pharmaceutical company, DRIg, has just announced a potential cure for cancer. The stock price increased from $5 to $138 in one day. A friend calls to tell you that he owns DRIg. You proudly reply that you do, too. Since you have been friends for some time, you know that he holds the market, as do you, and so you both are invested in this stock. Both of you care only about expected return and volatility. The risk-free rate is 3%, quoted as an APR based on a 365-day year. DRIg made up 0.82% of the market portfolio before the news announcement. a. On the announcement your overall wealth went up by 1.4% (assume all other price changes cancelled out so that without DRIg, the market return would have been zero). How is your wealth invested? b. Your friend's wealth went up by 2.5%. How is his wealth invested?
Your grandparents gave you ₱175,000.00 on your 16th birthday. You were instructed to invest the money so that the earnings can be used to pay for your tuition fee in college. Having heard about the risks and rewards of the stock market from you parents, you become interested in buying stocks in a particular company. Below are the options given to you by your parents Option 1: Company ABC’s selling stock is ₱1,500.00 per share that will have a dividend of ₱200.00 per year. The stock can be sold after two years at ₱2,000.00 and the market requires a rate of return of 15%. Option 2: Company XYZ’s selling stock is ₱1,000.00 per share that will have a dividend of ₱180.00 per year. The stock can be sold after two years at ₱2,000.00 and the market requires a rate of return of 7%. In which company will you invest your money? Why?
You are the owner of a graphic design firm that has a number of high-end clients. Your business started up last year and is financed by three angel investors. Your initial pro forma showed that you were going to be very profitable and return a maximum of $5 million to the angel investors within five-to-six years. The angel investors expect a return of 14 percent on their investment and originally invested $1 million in your startup. At this rate, the net present value (discounted cash flow of the future returns) was $3.8 million (Present Value of future discounted cash flows). Q2. After the first year, “so far so good,” you have signed on some new clients that show great potential and met the targets of your scorecard. That said, it looks like you will have to expand staff and buy some high-end equipment to satisfy the needs of the new clients. You estimate you will need an additional $2.2 million from investors to carry you through the next two years. With the new investments and…
You have started a company and are in luck—a venture capitalist has offered to invest. You own 100% of the company with 4.56 million shares. The VC offers $1.03 million for 820,000 new shares. b. What is the post-money valuation? c. What fraction of the firm will you own after the investment?
The questions relate to chapters, content and respective lectures of 23, 24, 25, 27, 28, & 29 of the Hull book. If you have any calculations, please show them in your answers. (SHOW ALL WORK CORRECTLY AND CLEARLY) THANK YOU! ANSWER ALL QUESTION PARTS!!

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