--Private Business Valuation Entrepreneurial Finance Prepare: OutReach Networks: First Venture Round UVA-F-1683 This is a group assignment on the OutReach Networks (ORN) case. Please prepare for submission questions 1 to 7. You should address your memo to "Mr. Phillip P. Perez, CEO of OutReach Networks, Inc.". Please follow the case write-up expectations outlined in the "Case preps method" file available on Canvas. You are also strongly encouraged to review lecture materials and "Note on Valuation in Private Equity Settings" to complete the valuation related questions below. 1. Using knowledge learned from "How Venture Capitalists Evaluate Potential Venture Opportunities" and "How do venture capitalists make decisions" to discuss how would a VC evaluate ORN as an investment opportunity. Your discussion should cover at least the market, the firm's business model, the management, the risk, and the exit route. 2. In what aspects is ORN a typical start-up company? In what aspects it is atypical? 3. What is the value of the firm under the NPV method? When estimating the FCFs, factor in the probability of failure to estimate the EXPECTED cash flows. Be clear about the assumptions you make and the inputs you use. You are encouraged to try alternative assumptions/inputs. But you have to offer a final estimate of the valuation. 4. What is the value of the firm under the venture capital method? Discuss your key inputs such as the discount rate, terminal growth rate, etc. Do a sensitivity analysis on selected key inputs. Take the possible future ownership dilution into consideration. Offer a guideline of expected dilution time and percentage of new shares issued. 5. Prepare a capitalization table for the company following the class example. Your table should show both the pre-money and post-money valuation and list number of shares, value, % of control, as well as price per share. You don't need to separate Mr. Pete Perez, the CFO and other Employee shares in your table -you can pool them into one group called "Founders". 6. Is Everest Partners justified in asking for a 30% equity stake? 7. What should Mr. Perez do?