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PROBLEM 10-5 Given Last year EBITDA $ 4,000,000 Added EBITDA 1,000,000 Funding need 5,800,000 VC's required rate 25.0% Rate on convertible debt 8.0% Term 5
| PROBLEM 10-5 | ||
| Given | ||
| Last year EBITDA | $ 4,000,000 | |
| Added EBITDA | 1,000,000 | |
| Funding need | 5,800,000 | |
| VC's required rate | 25.0% | |
| Rate on convertible debt | 8.0% | |
| Term | 5 | years |
| EBITDA multiple | 5 | |
| EBITDA growth rate | 20.0% | |
| Solution | ||
| a. What is the value of the combined firm in five years? | ||
| Estimated EBITDA | ||
| Combined EBITDA now | ||
| Estimated EBITDA in five years | ||
| Multiple | ||
| Enterprise Value | ||
| Less: Debt | ||
| Equity Value in five years | ||
| b. What share of the firm's equity will the VC require? | ||
| VC's Cash Flows | ||
| Year | Cash Flows | |
| 0 | ||
| 1 | ||
| 2 | ||
| 3 | ||
| 4 | ||
| 5 | ||
| Year 5 Conversion Value | ||
| VC Rate of Return | ||
| VC's Share | ||
| c. What share of the firm's equity will the VC require? | ||
| Estimated EBITDA | ||
| Combined EBITDA now | ||
| Estimated EBITDA in five years | ||
| Multiple | ||
| Enterprise Value | ||
| Less: Debt | ||
| Equity Value in five years | ||
| VC's share | ||
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Trade Union Finance
Authors: Marick F. Masters, Raymond Gibney
1st Edition
1032371382, 978-1032371382
