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John Smith, ceo of ReaseachNews inc., wants to raise $10M in Series A preferred stock from Greylock partners. Greylock partners projects that ResearchNews will reach an EBITDA of $100M in 10 years, at which time comparable companies are forecasted to be valued at 5 times EBITDA. Greylock Partners expects a 3X return on their investment.
A) What will the value of the firm be in 10 years (i.e., at exit)?
B) What is the minimum % share of the company Greylock Partners would require today to invest $10M in ResearchNews?
C) Suppose ResearchNews has 1 million shares outstanding before Greylock Partners's investment, and that Greylock Partners wants 20% ownership of ResearchNews for their investment. How many shares should Greylock Partners ask for? What is Greylock Partner's price per share?
Annuity A makes annual year-end payments of $976.50 for each of the next 10 years, while investment B makes annual year-end payments of $600 per year forever. At what interest rate would you be indifferent between the two investments? At interest rat..
Caan Corporation will pay a $3.02 per share dividend next year. The company pledges to increase its dividend by 5.5 percent per year indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock..
Define, compare, and contrast the four basic types of competition. Then, pick an industry (other than those used in exhibit 3.6) and describe the different types using firms and products in that industry.
Consider two mutually exclusive projects with the following cash flows: Project S is a 4 year project with initial (time 0) cash outflow of 3000 and time 1 through 4 cash inflows of 1500, 1200, 800 and 300 respectively. Project L is a 4 year project ..
You have just graduated from an MBA program and have secured a position as a fund manager for JPMorgan Smart Retirement Income Fund (JSRAX). You have been given $300 million to invest. Business Strategy Analysis: Develop an understanding of the busin..
Ranger Enterprises is considering pledging its receivables to finance a needed increase in working capital. Calculate the annual financing cost for the pledged receivables.
Compute the NPV statistic for Project Y if the appropriate cost of capital is 12 percent. Project Y Time: 0 1 2 3 4 Cash flow –$8,300 $3,410 $4,240 $1,580 $360 NPV $ should the project be accepted or rejected? Accepted Rejected
You plan to make monthly deposits of $500 into a retirement account that pays 12% interest compounded monthly. If your first deposit will be made one month from now, how large will your retirement account be in 30 years?
Ying Import has several bond issues outstanding, each making semi-annual interest payments. The bonds are listed in the table below. Bond Coupon Rate Price Quote Maturity Face Value 1 8.70% 106.7 7 years $26,000,000 2 6.90 93.7 10 years 32,000,000 3 ..
What additional risks will the company face as a result of the proposed international sales? b. What happens to the company's profits if the U.S. dollar strengthens? What if the U.S. dollar weakens?
Rodney Cashman has been investing $2,000 quarterly for the past 18 years in an equity mutual fund. How much is the fund worth now assuming he has earned 11.5% compounded quarterly on his investment?
ABC Printing Inc. raised $140 million in new debt and used this to buy back stock. After the recap, ABC's stock price is $7.6. If ABC had 70 million shares of stock before the recap, how many shares, in millions, does it have after the recap? (Enter ..
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