Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

EBV is considering a $5M Series A investment in Newco. EBV proposes to structure the investment as 6M shares of convertible preferred stock. The employees

EBV is considering a $5M Series A investment in Newco. EBV proposes to structure the investment as 6M shares of convertible preferred stock. The employees of Newco have claims on 10M shares common stock.Thus, following the Series A investment, Newco will have 10M common shares outstanding and would have 16M shares outstanding on conversion of the CP. EBV estimates a 25% probability for a successful exit, with an expected time in 5 years and an exit valuation of $500M. The $100M EBV funds has annual fees of 2% for each of its 10 years and earns 20% carried interest on all profits. How sensitive is this recommendation to different assumptions about the exit valuation and the probability of success? Book Referece: http://www.scribd.com/doc/112108306/Venture-Capital-e-Finance-Innovation

Step by Step Solution

There are 3 Steps involved in it

Step: 1

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

Intermediate Accounting Volume 1

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy

12th Canadian edition

119-49633-5, 1119496497, 1119496330, 978-1119496496

More Books

Students also viewed these Accounting questions

Question

1. Check readers and library books. Is there ethnic diversity?

Answered: 1 week ago