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# 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 \$5,500,000.00 3 \$50,000 IRR= 35% 31.71% 4 \$50,000 5 \$1,794,298 VC's required ownership share 40% Dividend rate on preferred stock 8% Required \$ in year 5 return to VC Firm \$2,200,000.00 Exercise price of warrants \$100,000.00 43.76%

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

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