c) How can you explain that different providers of capital have different valuations of the same company?

d) Suppose the minimum price at which the founders are willing to issue new company shares is USD 1.50 per share. Given the information above, is there a possibility to strike a deal with one of the VC? If yes, what number of shares will be issued under your deal structure? What share in capital will the VC get? And whats the value added of the deal to both parties?

A startup is expected to generate the following cash flows over the next five years (USD thousands). Thereafter, you expect the cash flows to grow at a constant rate of growth of 2% per year forever: 1 2 3 4 5 Free Cash Flow -1'300.00 -500.00 300.00 500.00 1'000.00 . . You also have the following information: Comparable mature and publicly traded firms have a WACC of 12%; The appropriate discount for lack of liquidity is 30% for mature non-publicly traded firms; The firm currently has 1 million shares of common stock outstanding. The firm requires an investment of USD 900'000 today. There are two potential investors interested in investing: o VCA: To value the company, VCA uses hurdle rates of 40% for years 1 and 2, 20% for years 3 and 4, and normal WACC thereafter. VCB: After inspecting the business plan, VCB assumes that there is a 25% probability that the startup will make it and turn into a mature publicly traded company. If the firm fails on the way, liquidation value is zero. . O Carefully answer the following questions: a) What is VCA's valuation and minimum required share in capital according to the information above? b) What is VCB's valuation and minimum required share in capital according to the information above? A startup is expected to generate the following cash flows over the next five years (USD thousands). Thereafter, you expect the cash flows to grow at a constant rate of growth of 2% per year forever: 1 2 3 4 5 Free Cash Flow -1'300.00 -500.00 300.00 500.00 1'000.00 . . You also have the following information: Comparable mature and publicly traded firms have a WACC of 12%; The appropriate discount for lack of liquidity is 30% for mature non-publicly traded firms; The firm currently has 1 million shares of common stock outstanding. The firm requires an investment of USD 900'000 today. There are two potential investors interested in investing: o VCA: To value the company, VCA uses hurdle rates of 40% for years 1 and 2, 20% for years 3 and 4, and normal WACC thereafter. VCB: After inspecting the business plan, VCB assumes that there is a 25% probability that the startup will make it and turn into a mature publicly traded company. If the firm fails on the way, liquidation value is zero. . O Carefully answer the following questions: a) What is VCA's valuation and minimum required share in capital according to the information above? b) What is VCB's valuation and minimum required share in capital according to the information above