Company cost of debt as discount rate

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1. TRUE OR FALSE According to Berkery the most efficient way of valuing a new venture is to discount future profits back to the present using the company’s cost of debt as the discount rate.

2. TRUE OR FALSE According to the 424B4 filed by Spotify on April 3rd, 2018, Spotify had gross margins of less than 25%, for the year ended December 31st, 2017.

3. TRUE OR FALSE. It is common for a VC fund to have investments of up to 25 different companies. A few large winners can easily offset the losers and sideways deals.

4. TRUE OR FALSE There is a potential conflict of interest if a Venture capital company manages multiple funds and each fund invests in a different series issued by the same company. The conflict arises because Fund X may invest in series A of company 1 and Fund Y may then invest in series B of company 1. If Fund Y places to high a pre-money value on the company it is essentially supporting investors in Fund X. The opposite is also a risk, if the pre-money valuation prior to the B series is set too low then the Venture Capital company is shifting value from Fund X investors to Fund Y investors.

Reference no: EM132058688

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