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Valuation Problem Set

# Valuation Problem Set - Venture Capital Method Valuation...

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Venture Capital Method   Valuation Problem Set  1)     V = \$100 million,  t = 5 years,  I = \$5 million,  r = 50% and 30%,  x = 1 million  a.  NPV of terminal value = V/(1+r)^t = 100million/ 1.5^5 =       Pre-money = 13,168,724.28 - 5,000,000     =       Share of company required for 50% return = 5,000,000/ 13,168,724.28  = 38%      NPV of terminal value = V/(1+r)^t = 100million/ 1.3^5 =      Pre-money = 26,932,907.43 - 5,000,000 =      Share of company required for 30% return = 5,000,000/ 26,932,907.43  =  19%  b.   Required shares for a 50% return   612,903  y=1000000*(.38/(1-.38))         Required shares for 30% return  234,568  y=1000000*(.19/(1-.19))        Price per share for 50% return  \$8.16  P=5000000/612903       Price per share for 30% return P=5000000/234568  \$21.32  pre-money = 13,168,724-12m = 1,168,724 share of company required = 12,000,000/13,168,724  = 91% pre-money = 26,932,907-12,000,000 =  14,932,907.00  share of company required = 12000000/26932907  =  45% y=1000000(.91/(1/.91))  10,111,111.11  shares P=12000000/10111111.11  \$1.19  per share y=1000000*(.45/(1-.45))  818,181.82  shares P=12000000/818181.82  \$14.67  per share

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