Please use the information above and answer questions #1-3

EXHIBIT 1 BioGene Systems profit and loss history. FY14 FY15 FY16 FY17 FY18 Revenue: 10.1 17.1 25.6 42.4 74.6 Cost of revenue 4.0 6.8 10.2 17.0 29.8 Gross margin 6.1 10.3 15.4 25.4 44.8 Expenses: Engineering 1.2 2.1 3.1 5.1 9.0 Marketing 2.5 4.3 6.4 10.6 18.7 G&A 0.6 1.0 1.5 2.5 4.5 Total expenses 4.3 7.4 11.0 18.2 32.2 Pretax profit 1.7 2.9 4.4 7.2 12.7 Taxes 0.7 1.2 1.7 2.9 5.1 After-tax profit 1.0 1.7 2.6 4.3 7.6 EPS (earnings per share) $0.06 $0.08 $0.12 $0.19 $0.33 Note: (1) All numbers in millions except EPS. (2) Stock is traded on NASDAQ. Closing price on 5/31/18 was $16.25. (3) End of fiscal year for 2018 is June 30. FY 18 numbers are estimates by stock market analysts and consistent with guidance by management. EXHIBIT 2 InterWeb pro forma profit and loss projections from business plan. FY17 FY18 FY19 FY20 FY21 FY22 Sales 0.0 0.0 5.0 20.0 41.0 62.0 Cost of sales 0.0 0.0 2.0 8.0 16.4 24.8 Engineering 0.7 1.0 1.5 2.4 4.9 7.4 Marketing 0.3 0.5 1.3 5.0 10.3 15.5 G&A 0.1 0.2 0.3 1.2 2.5 3.7 Total expenses 1.1 1.7 3.1 8.6 17.7 26.6 Pretax profit -1.1 -1.7 0.0 3.4 7.0 10.5 Taxes 0.0 0.0 0.0 0.2 2.8 4.2 After-tax profit -1.1 -1.7 0.0 3.2 4.2 6.3 Note: (1) 23.7 million shares outstanding as of 5/31/18. Management's business plan requires no additional venture capital or other funding. (2) End of fiscal year for 2018 is June 30. (3) All numbers in millions. 1. The current number of shares outstanding for BioGene is 23 million' and its current PE ratio is 49. Assuming a yearly growth in earnings of 50 per- cent for the next four years and a decline in the PE ratio to 25, this implies a valuation of $962 million in 2022. Assume InterWeb's earnings (after-tax profits) in 2022 are $6.3 million as stated in their business plan. Assigning a PE ratio of 50 of InterWeb in 2022, what will be their valuation? 2. What is Barbara's percentage ownership in each firm assuming nothing else changes in shares outstanding for either of them in the next four years when the options vest? 3. Using the valuation estimates in Question 1 for 2022, compare the offers in four years when the stock options will be fully vested. Assuming Barbara remains employed until that time and can sell her options in a cashless transaction on the same day, which stock option offer yields a larger gain? Make sure to include the cost of the stock options and state all critical assumptions. EXHIBIT 1 BioGene Systems profit and loss history. FY14 FY15 FY16 FY17 FY18 Revenue: 10.1 17.1 25.6 42.4 74.6 Cost of revenue 4.0 6.8 10.2 17.0 29.8 Gross margin 6.1 10.3 15.4 25.4 44.8 Expenses: Engineering 1.2 2.1 3.1 5.1 9.0 Marketing 2.5 4.3 6.4 10.6 18.7 G&A 0.6 1.0 1.5 2.5 4.5 Total expenses 4.3 7.4 11.0 18.2 32.2 Pretax profit 1.7 2.9 4.4 7.2 12.7 Taxes 0.7 1.2 1.7 2.9 5.1 After-tax profit 1.0 1.7 2.6 4.3 7.6 EPS (earnings per share) $0.06 $0.08 $0.12 $0.19 $0.33 Note: (1) All numbers in millions except EPS. (2) Stock is traded on NASDAQ. Closing price on 5/31/18 was $16.25. (3) End of fiscal year for 2018 is June 30. FY 18 numbers are estimates by stock market analysts and consistent with guidance by management. EXHIBIT 2 InterWeb pro forma profit and loss projections from business plan. FY17 FY18 FY19 FY20 FY21 FY22 Sales 0.0 0.0 5.0 20.0 41.0 62.0 Cost of sales 0.0 0.0 2.0 8.0 16.4 24.8 Engineering 0.7 1.0 1.5 2.4 4.9 7.4 Marketing 0.3 0.5 1.3 5.0 10.3 15.5 G&A 0.1 0.2 0.3 1.2 2.5 3.7 Total expenses 1.1 1.7 3.1 8.6 17.7 26.6 Pretax profit -1.1 -1.7 0.0 3.4 7.0 10.5 Taxes 0.0 0.0 0.0 0.2 2.8 4.2 After-tax profit -1.1 -1.7 0.0 3.2 4.2 6.3 Note: (1) 23.7 million shares outstanding as of 5/31/18. Management's business plan requires no additional venture capital or other funding. (2) End of fiscal year for 2018 is June 30. (3) All numbers in millions. 1. The current number of shares outstanding for BioGene is 23 million' and its current PE ratio is 49. Assuming a yearly growth in earnings of 50 per- cent for the next four years and a decline in the PE ratio to 25, this implies a valuation of $962 million in 2022. Assume InterWeb's earnings (after-tax profits) in 2022 are $6.3 million as stated in their business plan. Assigning a PE ratio of 50 of InterWeb in 2022, what will be their valuation? 2. What is Barbara's percentage ownership in each firm assuming nothing else changes in shares outstanding for either of them in the next four years when the options vest? 3. Using the valuation estimates in Question 1 for 2022, compare the offers in four years when the stock options will be fully vested. Assuming Barbara remains employed until that time and can sell her options in a cashless transaction on the same day, which stock option offer yields a larger gain? Make sure to include the cost of the stock options and state all critical assumptions