Stage of the investment, CP Venture Partners is looking at

Stage of the investment

Assignment Help Financial Management

Reference no: EM131073294

CP Venture Partners is looking at the possible investment of $1 million in an early-stage company (Startco). Given the stage of the investment, CP requires a 40% annual rate of return. The company earned $750,000 in EBITDA last year, and this amount is expected to grow at a rate of 30% per year over the next five years. Companies like Startco are currently being valued at five times EBITDA, and CP Venture Partners thinks this is a reaosnable multiple for the valuation of the firm in five years.

a. Assuming that Startco currently has no debt and does not plan to borrow over the next five years, what do you estimate the enterprise value of the company will be at the end of five years?

b. What fraction of Startco does CP Venture Partners need to own at the end of five years in order to realize the required rate of return on its investment?

Reference no: EM131073294

Questions Cloud

How organization may be creating a discriminating workplace : what recommendations would you make to your organization to prevent the discrimination cycle from getting out of control - Looking at your current workplace, analyze how your organization may be creating a discriminating workplace.

Any small organization-preferably and it company : Question: Organisation you are studying outsources Information Systems -related resources, explain how this is done. Evaluate the effectiveness of this outsourcing and analyse the reasons for its effectiveness or lack of effectiveness.

What is expected return on equally weighted portfolio : Consider the following information: Rate of Return If State Occurs. Probability of state of economy, Boom=.64, Bust= .36 Stock A, Boom=.11 Bust=.18 Stock B, Boom=.20 Bust= .10 Stock C, Boom=.38, Bust=-.04 A. What is the expected return on an equally ..

Expand production increase the NPV of the project : Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit, the firm expects to be able to sell 58,000 units a year at a price of $70 each. If the new product is a bust, only 38,000 units can be sold at a pr..

Stage of the investment : CP Venture Partners is looking at the possible investment of $1 million in an early-stage company (Startco). Given the stage of the investment, CP requires a 40% annual rate of return. The company earned $750,000 in EBITDA last year, and this amount ..

Managerial ethics to examine dilemma critically : Use an organisation that is or has been in the news during the past two years (work-related learning) and identify an ethical dilemma faced by that organisation as an example. Apply at least two theoretical concepts from managerial ethics to examin..

What is the annualized holding period return : Suppose you purchased a stock on June 5 for $30. It paid $0.20 cash dividends on July 1 and Oct. 1, and you sold it for $31.16 on Dec. 18. What is the annualized holding period return (APY) of this investment?

Entities of system are customer-supplier : John & co. is a Pharmaceutical company which sales lifesaving medicines. You have to draw E-R of sales and purchase system of above company. Main entities of system are Customer, supplier, product, stock etc.

Evaluated an early-stage investment : Venture Partners has evaluated an early-stage investment in a startup company (Startco). Startco needs $4 million in financing, and SPC has offered to provide the financing in exchange for a 40% interest in the company. What is SPC's post-money valua..

User Account

All Pages