valuation

# valuation - diluted=F.85 diluted F=F.85-44.7 =21.88 3...

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I=Initial investment Post=Post money Pre=pre-money T-Terminal Value W=Expected Value of IF=% ownership of VC X=# of shares for entrepreneur Y=# of shares for VC NI=Net income P/E-Price Earning Ration P-Price per share t-time (in Yrs) 1a.) I=\$5M NI (yr 5)=\$5M P/E/=20X F @ 50% IRR: W=1X (1+IRR)^t =\$5M * (1.5)^5 =\$37,968,750 T-NI * P/E =\$5M *20 =\$100M F=W/T =\$37,968.750/\$100M=38% F @ 30% IRR:f W-\$5M * 1.3^) =\$18,564.650 F-\$18,564,650/\$100M=18.6% b. Given: X=\$1,000,000 shartes outstanding F @ 50%IRR=39% [email protected] 30% IRR=18.6% @50% IRR Y=X(F/1-F)

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=\$1,000,000 (39%/61%) = 639,345 shares P=I/Y =\$5M/639,345 shares P=I/Y =\$5M/639,345 shares=7.32 per share @30%IRR: Y==\$1,000,000 (18.6%/81.4%) =228,502shares P=\$5M/228,502=\$21.88 per share c.) Given: I=11M T=100Mil @50% @30% V-12M* (1.5^5) V=\$12M*(1.3^5) =\$91,125,0000 =\$44,555,160 F=V/\$100M F=V/\$100M =91% =44.6% Y=\$1,000,000 (91%/9%) Y-1,000,000(44.6/55.4) =10,111,112 shares =805,055 shares P=\$12M/Y P=12M/Y =\$1.19 per share =\$14.91 per share 2.) Given: 15% stock option @50%IRR @30%IRR F=38% F=18.6% % ownership of both VC and entrepreneurs=85%
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Unformatted text preview: diluted=F/.85 diluted F=F/.85-44.7% =21.88% 3.) V=\$100M V after stock option=\$85M Post 1=\$15,861.832 Post2-\$38,689,122 F1=31.5% F2=7.8% I=\$5M I=\$3M Y=460,325 shares Pre2=\$35,689,122 X-\$1,000,000 X2-(X+Y) P=\$10.86 per share =1,460,325 Y2=\$122,757 P2-\$24.44 P2-\$24.44 4.) He should bootstrap, while looking for angel investors, and try to raise funds from debt financing until he is able to build a prototype product. He should also specifically seek investors who know about related technology or have expertise in the area. It is often difficult to persuade prospective investors to invest into a company in early stage because of high risk associated in it, and the investors high risk aversion. 4b) Henry should formulate a projected cash flow considering a certain percentage of viability. He should pursue a short term debt at this point with favorable interest rates with or without warrant options on principal and interest....
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valuation - diluted=F.85 diluted F=F.85-44.7 =21.88 3...

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