question1

(a)You founded your own company two years ago. Initially you contributed RM200,000 of your own money and in return received 3 million shares of stock. Since then, you have sold an additional 1,000,000 shares to angel investors. Now you are considering raising even more capital from a venture capitalist (VC). This VC would invest RM12 million and would receive 6 million newly issued shares.

i.Calculate the post money valuation.

ii.Find the percentage of the firm that VC end up owning.

iii.Calculate the percentage of the firm you owned.

iv.Find the value of your share.

(c) The firm you founded currently has 10 million shares of which you own 6 million. You are considering an IPO where you would sell 3 million shares for RM30 each.

i. If all shares sold are primary shares, find the amount that the firm raise.

ii. Calculate your percentage ownership of the firm after the IPO.

(b)Consider two 20 years bond with annual coupon payments. Bond A has an 8 percent coupon rate and bond B has a 4 percent coupon rate. If the market yield to maturity is 5 percent:

i.Calculate the price of each bond assume a RM100,000 face value.

ii.Identify the bonds was traded at premium, par or discount.

(c)Consider a 30 years, zero-coupon bond with a yield to maturity of 5 percent. If the bond is issued with a face value of RM 500,000.

i.Calculate the price of the bond.

ii.Suppose interest rate suddenly rise so that investors now demand an 8 percent yield to maturity before they invest in this bond. Calculate the price of the bond now with the new yield.

iii.Describe the relationship of the bond yields to price of bond.