Covid Treatments (Covid T) is now completing its first year of operations. The Company only raised an $6 million in the Series A round of financing. The companys revenues have not grown as projected because of the discovery of an easy to use vaccination has reduced the need for their treatment systems. The three founders are at a crossroads. By the end of the year they will run out of cash. However, they have been able to repurpose their treatment systems to provide care for flu, a more common wide-spread illness that has great market promise. Their current financial projections are quite aggressive. The company new projections suggest they need to raise additional capital of $15 million in a Series B to get to profitability by year 5.

But their current investor group is tired and are actively seeking a buyer with the hope of a return of their original capital equal to the discounted future cash flows from the current operations. There is a bottom fishing investor willing to price the company as a fire sale. The CEO recently pitched a MedTech private equity firm that is interested in promising therapeutics like Covid T. The founders, as a group, believe there is an equal probably of each outcome.

You have been approached by the company to become their investment banker. Before you take on this engagement, you must decide what the value of the company is and if this engagement is worth your time. A reminder that in addition to a retainer, your contingency fee is dependent on the sale price.

The companys historical and projected financials are attached.

1. What method(s) of valuation do you plan to use? Why? (4 pts)
2. What is your view of the companys valuation? Justify it with numerical support. (5 pts)
3. Using the Lehman formula what will be your fee for the successful disposition of the company? (1 pt)