Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A start-up company needs $2 Million funds to finance their growth. A venture capitalist approached the shareholders to provide them with the funds needed but


A start-up company needs $2 Million funds to finance their growth. A venture capitalist approached the shareholders to provide them with the funds needed but the required return per year demanded is 40% for the next 5 years.

Estimated EBITDA of the firm for the current year is $200,000 which is expected to be increased by 30% per year. Estimated EBITDA multiple at the end of year 5 is 20 while the company expects to have $300,000 cash and no interest-bearing debt at that time.

Calculate:

  1. The percentage of ownership to be given to venture capitalist  (4 marks)
  2. Post Money and Pre Money values (2 marks)

Step by Step Solution

3.46 Rating (156 Votes )

There are 3 Steps involved in it

Step: 1

Calculations for the StartUp Company 1 Terminal Value Year 5 Projected EBITDA in Year 5 200000 1 305 ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation The Art and Science of Corporate Investment Decisions

Authors: Sheridan Titman, John D. Martin

3rd edition

133479528, 978-0133479522

More Books

Students also viewed these Finance questions