1. One of your early assignments at your new place of employment at an equity crowdfunding platform is to assess the value of companies that are seeking listing on the platform. A new start-up presents itself with the following cash flow projections. You consider using NPV and option pricing methods to value this company. All amounts are in thousands Year o Year 1 Year 2 Year 3 Year 4 Year 5 Cash flow except 0 CapEX 0 0 15 15 40 Capital Expenditures -130 0 0 0 0 0 Total Cash Flow -130 0 0 15 15 40 WACC = 25%, terminal growth rate - 3%. Initial investment: $30 thousand for R&D equipment and personnel The $100 thousand expenditure on the plant could be undertaken any time in the first two years (whenever the project would be undertaken the present value of the plant construction expenditures would total $100 thousand in today's dollars) The entrepreneur pursues the $100 thousand expenditure only it the first stage investment is successful. The Valuation decision now based on a $30 thousand investment bundled with a two-year European call option and priced using the Black-Scholes model. Time to expiration (T-1) - 2 years. Risk-free rate (r) - 7%. Exercise price (x) - present value of the investment to build the plant = $100 thousand. Stock Price (S) - discounted cash flows generated by the underlying assets associated with the expansion opportunity can be computer for Year Ousing a discount rate of 25% and a terminal growth rate of 3% per year. The standard deviation (o) based on comparables is 0.6. Do you think listing this company on your equity crowdfunding platform would be good for its reputation and long term success of the start-up, and for the platform? Why? Or why not? 1. One of your early assignments at your new place of employment at an equity crowdfunding platform is to assess the value of companies that are seeking listing on the platform. A new start-up presents itself with the following cash flow projections. You consider using NPV and option pricing methods to value this company. All amounts are in thousands Year o Year 1 Year 2 Year 3 Year 4 Year 5 Cash flow except 0 CapEX 0 0 15 15 40 Capital Expenditures -130 0 0 0 0 0 Total Cash Flow -130 0 0 15 15 40 WACC = 25%, terminal growth rate - 3%. Initial investment: $30 thousand for R&D equipment and personnel The $100 thousand expenditure on the plant could be undertaken any time in the first two years (whenever the project would be undertaken the present value of the plant construction expenditures would total $100 thousand in today's dollars) The entrepreneur pursues the $100 thousand expenditure only it the first stage investment is successful. The Valuation decision now based on a $30 thousand investment bundled with a two-year European call option and priced using the Black-Scholes model. Time to expiration (T-1) - 2 years. Risk-free rate (r) - 7%. Exercise price (x) - present value of the investment to build the plant = $100 thousand. Stock Price (S) - discounted cash flows generated by the underlying assets associated with the expansion opportunity can be computer for Year Ousing a discount rate of 25% and a terminal growth rate of 3% per year. The standard deviation (o) based on comparables is 0.6. Do you think listing this company on your equity crowdfunding platform would be good for its reputation and long term success of the start-up, and for the platform? Why? Or why not
