January 1^st 2026, there are now seven locations of Cool Beans, the quality of the coffee has improved, EBIT per location is averaging $110,000 annually not including direct sales of your signature roasted coffee. Direct sales of your roasted coffee through the website and in stores are contributing $300,000 annually to EBIT. Molly is old friends with a regional purchasing manager for Publix and believes that Cool Beans belongs on the shelves of their 1,200 locations. You estimate that it would take $2,000,000 to expand roasting operations, buy Arabica beans in bulk directly from Colombia to maintain consistent quality, and for the working capital which is necessary to satisfy such a large customer. You approach a Venture Capital firm, Bloom & Marner Inc. who agree to fund the expansion if you issue 900,000 shares in exchange for the funding.

1. What is the implied value of Cool Beans based on the capital contribution of Bloom & Marner Inc.? (2pts)

2. What percentage of the company do you own after accepting Bloom & Marner Inc. as an equity investor? (2pts)

3. Given a corporate tax rate of 21%, based on a pro forma business plan with a 10% annual growth rate and a 25% equity cost of capital, what is the estimated value of Cool Beans based on Free Cash Flow before the equity contribution? (2pts)