$1.$ What are the challenges of valuing an early$-$stage company? $2.$ In what ways is ORN a typical start$-$up company? In what ways is it atypical? $3.$ What is the value of the firm under the venture capital method? $4.$ What is the value of the firm under the discounted cash flow method? Assume that after $2017$ cash flows grow at a rate of $5\%$ forever $5.$Is Everest Partners justified in asking for a $30\%$ equity stake? $6.$ What should Pete Perez do$?$ Year $2009201020112012$P $2013$P $2014$P $2015$P $2016$P $2017$P

In millions of dollars

Revenue $$9\mathrm{.}00$ $$22\mathrm{.}00$ $$63\mathrm{.}00$ $$137\mathrm{.}00$ $$198\mathrm{.}00$ $$260\mathrm{.}00$ $$335\mathrm{.}00$ $$425\mathrm{.}00$ $$525\mathrm{.}00$

Year on Year Growth $144\%186\%117\%45\%31\%29\%27\%24\%$

COGS $$4\mathrm{.}20$ $$10\mathrm{.}90$ $$37\mathrm{.}20$ $$82\mathrm{.}40$ $$117\mathrm{.}10$ $$153\mathrm{.}40$ $$194\mathrm{.}30$ $$242\mathrm{.}30$ $$290\mathrm{.}00$

Gross Profit $$4\mathrm{.}80$ $$11\mathrm{.}10$ $$25\mathrm{.}80$ $$54\mathrm{.}60$ $$80\mathrm{.}90$ $$106\mathrm{.}60$ $$140\mathrm{.}70$ $$182\mathrm{.}70$ $$235\mathrm{.}00$

Operating Expenses $$2\mathrm{.}79$ $$4\mathrm{.}32$ $$8\mathrm{.}50$ $$15\mathrm{.}76$ $$20\mathrm{.}78$ $$29\mathrm{.}90$ $$41\mathrm{.}85$ $$57\mathrm{.}35$ $$77\mathrm{.}15$

EBITDA $$2\mathrm{.}01$ $$6\mathrm{.}78$ $$17\mathrm{.}30$ $$38\mathrm{.}84$ $$60\mathrm{.}12$ $$76\mathrm{.}70$ $$98\mathrm{.}85$ $$125\mathrm{.}35$ $$157\mathrm{.}85$

Depriciation and Amor $$0\mathrm{.}05$ $$0\mathrm{.}11$ $$0\mathrm{.}32$ $$0\mathrm{.}69$ $$0\mathrm{.}99$ $$1\mathrm{.}30$ $$1\mathrm{.}68$ $$2\mathrm{.}13$ $$2\mathrm{.}63$

EBIT $$1\mathrm{.}97$ $$6\mathrm{.}67$ $$16\mathrm{.}99$ $$38\mathrm{.}16$ $$59\mathrm{.}13$ $$75\mathrm{.}40$ $$97\mathrm{.}18$ $$123\mathrm{.}23$ $$155\mathrm{.}23$

EBIT margin $21\mathrm{.}83\%30\mathrm{.}32\%36\mathrm{.}96\%27\mathrm{.}85\%29\mathrm{.}86\%29\%29\mathrm{.}01\%28\mathrm{.}99\%29\mathrm{.}57\%$

Interest Expense $$-$ $$-$ $$-$ $$-$ $$-$ $$-$ $$-$ $$-$ $$-$

Profit Before Taxes $$1\mathrm{.}97$ $$6\mathrm{.}67$ $$16\mathrm{.}99$ $$38\mathrm{.}16$ $$59\mathrm{.}13$ $$75\mathrm{.}40$ $$97\mathrm{.}18$ $$123\mathrm{.}23$ $$155\mathrm{.}23$

Taxes $30\%$ $$0\mathrm{.}59$ $$2\mathrm{.}00$ $$5\mathrm{.}10$ $$11\mathrm{.}45$ $$17\mathrm{.}74$ $$22\mathrm{.}62$ $$29\mathrm{.}15$ $$36\mathrm{.}97$ $$46\mathrm{.}57$

Net Income $$1\mathrm{.}38$ $$4\mathrm{.}67$ $$11\mathrm{.}89$ $$26\mathrm{.}71$ $$41\mathrm{.}39$ $$52\mathrm{.}78$ $$68\mathrm{.}03$ $$86\mathrm{.}26$ $$108\mathrm{.}66$

Capital Expenditures $$1\mathrm{.}00$ $$1\mathrm{.}45$ $$1\mathrm{.}90$ $$2\mathrm{.}45$ $$3\mathrm{.}10$ $$3\mathrm{.}83$

INWC $$6\mathrm{.}00$ $$8\mathrm{.}67$ $$11\mathrm{.}39$ $$14\mathrm{.}67$ $$18\mathrm{.}61$ $$22\mathrm{.}99$

FCF $$20\mathrm{.}39$ $$32\mathrm{.}26$ $$40\mathrm{.}80$ $$52\mathrm{.}58$ $$66\mathrm{.}67$ $$84\mathrm{.}46$

Company in million of $ MC Rev Rev $1$ yr growth EBITDA Margin $\%$ Tot Debt$/$Cap $\%$ TEV$/$FOW EDITDA Forward P$/$E Beta

Acme $($APKT$)$ $$2,244\mathrm{.}00$ $$295\mathrm{.}0045\mathrm{.}60\%30\mathrm{.}10\%$ $$-13\mathrm{.}7$x $24\mathrm{.}3$x $1\mathrm{.}50$

Aruba $($ARUN$)$ $$2,258\mathrm{.}00$ $$433\mathrm{.}0048\mathrm{.}20\%3\%013\mathrm{.}3$x $31\mathrm{.}5$x $1\mathrm{.}95$

Aviat $($AVNW$)$ $$108\mathrm{.}00$ $$463\mathrm{.}003\mathrm{.}90\%0\mathrm{.}20\%7\mathrm{.}60\%4\mathrm{.}2$x $21\mathrm{.}3$x $1\mathrm{.}35$

Cisco $($CSCO$)$ $$100,206\mathrm{.}00$ $$43,724\mathrm{.}004\mathrm{.}70\%25\mathrm{.}30\%26\mathrm{.}30\%6\mathrm{.}4$x $10\mathrm{.}3$x $1\mathrm{.}20$

Mean $$26,204\mathrm{.}00$ $$11,229\mathrm{.}0025\mathrm{.}60\%14\mathrm{.}60\%17\%9\mathrm{.}4$x $21\mathrm{.}8$x $1\mathrm{.}5$

Median $$2,251\mathrm{.}00$ $$448\mathrm{.}0025\mathrm{.}20\%14\mathrm{.}10\%17\%9\mathrm{.}9$x $22\mathrm{.}8$x $1\mathrm{.}43$