Question Three:

1. An entrepreneur needs $1 Million for his idea. He has registered a company and needs your advice to know how many percentages of his company's ownership is required to be given to the investors to be able to raise this money (Bank loans are not going to be granted).

• Investor Required rate of return per year 80%
• Holding period 5 years
• Estimated EBITDA of firm in year 5, $5 Million, with estimated EBITDA multiple of 7 and no interest-bearing debt and cash in year 5.

(1.5 marks for future hoped for investment value in business, 1.5 marks for future equity value of business, 1 mark for percentage of ownership)

(4 marks)

1. How much is the post money and pre money value for part 1?

(4 marks)

1. Explain in detail the ways the entrepreneur can use to grant less ownership percentage to the investors? (3 marks for at least two well explained reasons)