a) Bank Town Limited (BTL) is a small but growing financial institution. Bank Town Ltd is a relatively new company and they are seeking funds to expand their range of financial products to be offered to customers nationally. They have approached venture capital company Clayton Capital Ventures for funding. Clayton Capital Ventures (CCV) is considering investing into Bank Town Ltd and is assessing their potential investment. CCV have collected the following information: Amount of investment: $10 million; Bank Town Ltd should become profitable in four years, so term of the investment is four years; The expected profit at the end of four years is $4 million; Bank Town Ltd currently has 1 million ordinary shares on issue and outstanding, all shares are owned by founders; For a three-year investment like this, Clayton Capital requires a return of 33 percent per annum, compounding annually; There is a similar company to Bank Town Ltd, Lendcombe Ltd (LND). LND generated a profit of $3.2 million last year. LND's market value of equity is $54 million. Neither Bank Town Ltd or Lendcombe Ltd have any debt outstanding. Required: i. Use the VC method to determine the value of Bank Town Ltd at the end of three years. ii. Calculate: 1. The present value of Bank Town Ltd 2. The pre-money value of Bank Town Ltd 3. The post-money value of Bank Town Ltd iii. The percentage of Bank Town Ltd that Clayton Capital Ventures will own for the $10 million investment. b) Discuss the following forms of share buy-backs permitted in Australia. Include a short description of the characteristics of each form and any legal conditions that are imposed: i. Equal access buy-backs ii. Selective buy-backs iii. On market buy-backs iv. Employee share scheme buy-backs v. Minimum holding (odd lot) buy-backs a) Bank Town Limited (BTL) is a small but growing financial institution. Bank Town Ltd is a relatively new company and they are seeking funds to expand their range of financial products to be offered to customers nationally. They have approached venture capital company Clayton Capital Ventures for funding. Clayton Capital Ventures (CCV) is considering investing into Bank Town Ltd and is assessing their potential investment. CCV have collected the following information: Amount of investment: $10 million; Bank Town Ltd should become profitable in four years, so term of the investment is four years; The expected profit at the end of four years is $4 million; Bank Town Ltd currently has 1 million ordinary shares on issue and outstanding, all shares are owned by founders; For a three-year investment like this, Clayton Capital requires a return of 33 percent per annum, compounding annually; There is a similar company to Bank Town Ltd, Lendcombe Ltd (LND). LND generated a profit of $3.2 million last year. LND's market value of equity is $54 million. Neither Bank Town Ltd or Lendcombe Ltd have any debt outstanding. Required: i. Use the VC method to determine the value of Bank Town Ltd at the end of three years. ii. Calculate: 1. The present value of Bank Town Ltd 2. The pre-money value of Bank Town Ltd 3. The post-money value of Bank Town Ltd iii. The percentage of Bank Town Ltd that Clayton Capital Ventures will own for the $10 million investment. b) Discuss the following forms of share buy-backs permitted in Australia. Include a short description of the characteristics of each form and any legal conditions that are imposed: i. Equal access buy-backs ii. Selective buy-backs iii. On market buy-backs iv. Employee share scheme buy-backs v. Minimum holding (odd lot) buy-backs
