Chapter 02 Questions and Problems

Chapter 02 Questions and Problems - ENTREPRENEURIAL...

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E NTREPRENEURIAL F INANCE : Strategy Valuation and Deal Structure Chapter 2. New Venture Financing: Considerations and Choices Questions and Problems 1. Give three examples of bootstrap financing. Why do you think this type of funding is so widely used by entrepreneurs when starting new ventures? 2. Use the Internet to locate some Web sites of venture capital firms and business angel groups. Based on your search, what are the characteristics of investments sought by these two types of investors? What are the main differences in investment characteristics between the angels and the VCs? What differences in investment objectives, if any, do you see within each type? 3. Name three factors an entrepreneur should consider when contemplating pursuing venture capital funding. 4. Describe some of the ways Google fosters innovation within the company. Has it been successful, and if so, why? 5. Your company is going to purchase $10,000 of raw material from a new supplier. The supplier offers you terms of 1/15, net 45. That is, if you pay within 15 days, you get a 1% discount. If not, the total amount is due in 45 days. a. How much will you owe the supplier if you pay on day 10? b. What is the implicit interest rate if you forgo the discount and pay on day 45? 6. A firm has a $100,000 account receivable it is considering factoring. It expects to collect the full amount in 60 days, but is in need of immediate cash. A bank offers the firm a short-term loan secured by the receivable at 12% interest. The factor will advance 85% of the receivable immediately, with a $15,000 reserve. The full receivable is collected in 60 days, from which the factor will deduct a 2.5% fee. What should the company do? 7. Describe three benefits of “private placement” debt or equity. 8. In some activities, such as education and healthcare, for-profit and not-for-profit enterprises compete with each other. What do you think it means for an enterprise to be organized as not-for- profit? Why do you think not-for-profits sometimes compete aggressively for business? As a prospective entrepreneur of a venture that could be organized as either, what factors do you think
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Chapter 02 Questions and Problems - ENTREPRENEURIAL...

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