Magnus Processors, Inc. (MGNS)

Magnus Processors, Inc., a relatively new high growing graphics chip manufacturer, has decided it needs to raise needed operational capital, expand into developing markets, fund their pension plan, and promote the name and profile of the firm. In response, after consultation with a prominent investment banking firm (Golden Grizzly, Inc.), the company decided to go public and list its shares on the Nasdaq under the symbol MGNS. During the pre-IPO due diligence period, Golden Grizzly, Inc. hired you to do a top down analysis of itself to determine an appropriate market valuation and IPO selling price.

Golden Grizzly, Inc. is expanding its capital markets, investment banking, and mergers & acquisitions efforts and assigned you as lead consultant. You are tasked with the responsibility of clearly delineating a step-by-step valution process so MGNS will understand the derivation of and factors contributing to its overall market valuation. The head of Investment Banking at Golden Grizzly, Inc. has directed you to develop an Excel spreadsheet as the primary format of your efforts so future consulting projects and easily be compared and replicated.

Being recently hired by Golden Grizzly Inc. investment banking arm and desiring to make a positive impression, you have compiled an ordered list of calculated variables needed to derive an appropriate valuation-the list reads:

• Operating Cash Flow (OCF) annually first ten years and terminal phase
• Free Cash Flow (FCF) annually first ten years and terminal phase
• Asset Beta (Industry Beta) company will use in its analysis
• Discount rate: appropriate rate to use for derivation of firm valuation & stock price
• Asset value: present value FCFs first ten years and terminal phase
• Equity value: asset value net of debt
• Stock price: equity value of firm expressed on a per share basis
• Recommendations: IPO process, corporate structure and/or operations to improve MGNSs stock price