How much of the equity in the company

Assignment Help Finance Basics
Reference no: EM132753356

Question

You are a venture capitalizing considering making a SEK 100 million investment in Ferris Media, a young technology company, and you have been provided with the following forecasts of revenues and free cash flows to the firm.

1 2 3

Revenues 100.00 500.00 1,500.00

FCFF (-150.00) (-50.00) 75.00

At the end of year 3, you expect the company to become a stable growth company, with year 3 FCFF, growing 2% a year in perpetuity, and to be acquired by a publicly traded company. The unlevered beta for the business is 1.26, but you are a sector-focused venture capitalist, and your portfolio of holdings has a correlation of only 0.5 with the market. After the third year the correlation will be 1.0 (The risk free rate is 2% and the market risk premium is 6%.)

Question: Assuming that there is no debt or cash in the company, how much of the equity in the company should you demand as your fair share for the SEK 100 million investment?

Reference no: EM132753356

Questions Cloud

What is the net cash provided by investing activities : Acquired land by issuing common stock of par value $100,000. What is the net cash provided (used) by investing activities
What is bae expected dividend yield : Corporation to pay a dividend of D1 = $2.50 and to grow at constant rate of 7% per year. The stock sells at price of $25. What is Bae expected dividend yield?
Calculate the after-tax cost of debt : Nova Corporation is interested in measuring the cost of each specific type of capital as well as the weighted average cost of capital.
Define ways to improve company current financial condition : Based on your assessment of the company's financial condition in part (4), suggest at least three ways to improve the company's current financial condition.
How much of the equity in the company : You are a venture capitalizing considering making a SEK 100 million investment in Ferris Media, a young technology company, and you have been provided
What is bae expected capital gains yield : Dividend of D1 = $2.50 and to grow at a constant rate of 7% per year. The stock sells at a price of $25. What is Bae's expected capital gains yield?
Prepare the journal entry to record depreciation on December : On July 1, 2019, Pharoah Company purchased new equipment for $70,000. Prepare the journal entry to record depreciation on December
Determine the amount of factory overhead : During March 2019, Annapolis Corporation recorded $43,000 of costs related to factory overhead. Alpha's overhead application rate is based on direct labor hours
Investors can exploit financial statement : Critically evaluate the following statement: "investors can exploit financial statement information to identify companies with a greater likeliyhood of future e

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd