Estimate the value of the firm

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You are a venture capitalist and have been approached by a private tech firm for a potential $4.2M investment. The firm has no outstanding debt and had FCF for fiscal year ended of $2.5M. The firm currently has 3 million outstanding shares (before potential investment). Assuming the firm raises the VC funding from you today, it will invest this money in opportunities that will allow the FCF to grow by 5% per year, forever. Your hurdle rate for this type of investment is 30%.

1) Assuming you invest, estimate the value of the firm?

2) If you're investing the $4.2M of VC today, what % of the firm's ownership will you demand in return?

3) At what price per share will you make your investment?

Reference no: EM133112956

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