Adina Watches was set up in 2019 to create watches with an Aussie design. They business is set up as a corporation. By using crowdfunding they can determine the demand before they start manufacturing. Each contributed $10,000 to the company. Now they have finished the prototype and have launched a Kickstarter campaign three weeks ago to take pre-orders. The campaign will run for six weeks. They have set their requirement minimum at $50,000 or the campaign will be cancelled and money returned. For the first three weeks, the amounts committed are:

Week	Cumulative total commitment
1	$8000
2	$17000
3	$25000

The owners are worried about reaching the minimum commitment. The $50,000 requirement is their estimated break-even point but they could reduce this before the deadline if needed. They have already paid $20,000 in development costs and there are no additional costs if they proceed. They are charging $400 for each watch with $180 the cost for each watch.

Q: What do you think they will reach in terms of commitment? Do you have any suggestions to improve these prospects? Should you adjust the commitment required?

There are 4 founders who each own 25% of the company and two of them are thinking of leaving the company. They never agreed to an exit plan so when they brought it up the other two offered them their money back, but they think the company will be worth a lot more. They estimate that they will be able to sell upwards of 800 in the first year, increasing by 200 each of the next three years before slowing down rapidly and selling only 500 watches over each of the next two years before going out of style. They think the business is worth $1,000,000 and they each want $250,000 for their 25%.

Q: Do you agree with the valuation of $1,000,000? Do you agree that 10% is the appropriate discount rate? Why or why not?