IP-5 - PROBLEM 8-2 Given Capital needed Projected EBITDA in...

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PROBLEM 8-2 Given Solution Legend Capital needed $500,000 = Value given in problem Projected EBITDA in year 5 $1,050,000 = Formula/Calculation/Analysis required Exit year 5 = Qualitative analysis or Short answer required EBITDA sales multiple in year 5 6.00 times = Goal Seek or Solver cell Interest bearing debt in year 5 $1,000,000 = Crystal Ball Input Total debt in year 5 $1,200,000 = Crystal Ball Output Cash in year 5 $200,000 Analysis of financing structure #1--Straight Common Stock VC's required rate of return 45% Required $ return to VC Firm in year 5 $3,204,867.03 Enterprise value of firm in year 5 $6,300,000.00 Equity value in year 5 $5,500,000.00 58.27% Analysis of financing structure #2--Convertible Debt Cash to Conv Debt VC's required rate of return 35% Coupon rate on debt 10% 0 $(500,000) Terminal Cash to have return = 35% Required $ in year 5 return to VC Firm $1,744,297.66 1 $50,000 = $1,744,297.66 Enterprise value of firm in year 5 $6,300,000.00 2 $50,000 Equity value in year 5
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This note was uploaded on 07/24/2009 for the course FIN FIN taught by Professor Robbani during the Summer '09 term at University of Maryland Baltimore.

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IP-5 - PROBLEM 8-2 Given Capital needed Projected EBITDA in...

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