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Management team identifies a security software firm, DigiVault, that has developed a 256-bit data encryption key that is licensed by Fortune 100 companies and governments to protect sensitive database information from prying eyes. The firm's founders are out of money and want to sell their technology. Because you and your team don't have enough money to acquire the firm outright on your own, you turn to outside sources of funding. A venture bank is willing to put up a $3.5 million, five-year loan at 11% per year, which only has interest payments due during its life; the principal balance will be paid off at the liquidity event. Your team puts up $750,000 of its own capital. One of your friends from the MBA program is a venture capitalist, and his firm agrees to invest $3.5 million at an expected 60% annual return for five years, at which time they expect a liquidity event in order to obtain their money and the return back. Include all your calculations to support each answer in order to earn full credit. Answers must be completed in sequence. Required: (a) Assume that in five years, DigiVault will have an expected exit enterprise value of $48 million, based on an EBITDA multiple of 5.0 from similar exit transactions. What does this indicate the firm's expected EBITDA will be at that time? (b) Given the future value calculated in (a), what will be the equity value at that time? (c) Because the VC firm expects a 60% compound return on its investment, what would be the dollar value of its portion of the equity value you calculated in (b)? (d) Based on your answer in (c), what would be the amount of the equity up front that you would have to give up in order to obtain DigiVault's original venture capital investment? (e) What will be the dollar value of the management team's original $750,000 equity investment at the time of the liquidity event?
Research a publicly held company of your choice, and access the company's Web page on the Internet to read its most recent annual report. The annual report is typically found in an "Investor Relations" or "Company Information" section within th..
Computation of NPV and sensitivity Analysis and What other factors should be taken into account before Mississippi Delta Inc
What equal, annual amount must you save at the end of each of the next 15 years to achieve your objective, assuming you currently have $10,000 available to meet your goal?
Metallica Bearings, Inc., is a young start-up company. No dividends will be paid on the stock over the next fifteen years, because the firm needs to plow back its earnings to fuel increase.
On August 19, 2004 Google issued its IPO of 19.7 million shares to the initial investors at $84.63 per share. The closing price of the stock that same day was $100.08. What was the dollar value of the underpricing associated with the Google IPO?
O'Brien Ltd.'s outstanding bonds have a $1,000 par value, and they mature in 25 years. Their nominal yield to maturity is 9.25%, they pay interest semiannually, and they sell at a price of $850. What is the bond's nominal (annual) coupon interes..
Assume the market portfolio has an expected return of 10% and a volatility of 20 percent, while Microsofts stock has volatility of 30 percent.
A 20-year bond pays 12% on a face value of $1,000. If similar bonds are currently yielding 9%, Find out the market value of bond? Use annual analysis.
Which portfolios might be held by an investor who likes high mean and low standard deviation?
Investors expect a corporation to announce a 10% increase in earnings, but instead the firm announces a 1% increase. If the market is semistrong-form efficient,
Beta Industries has a net income of $2,000,000 and it has $1,000,000 shares of common stock outstanding. The company's stock currently trades @$32 a share.
The ABC Resort is considering hosting a prestigious corporate awards convention next year that will require 55 percent of the total rooms in the resort for 8 days and seven nights during the resort's peak season.
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