QUESTIONS

What are the difficulties and challenges that investors face in valuing early$-$stage companies?

Describe the difference between pre$-$money and post$-$money valuation. In what settings are investors

most likely to focus on pre$-$money valuation, and when on post$-$money valuation?

After Coinbase's $2013$ financing, what was the total equity ownership by venture firms?

What are the potential shortfalls of using comparables to value a private company?

What are appropriate multiples to use when comparing two companies with different capital structures

and varying levels of capital expenditures? Which are not?

Calculate the WACC using the following assumptions:

$D=$$$200$ million

$r_d=4\%$

$r_f=3\%$

$E=$$$400$ million

$=30\%$

$=1\mathrm{.}9$

$(r_m-r_f)=7\mathrm{.}5\%$

Recalculate the NPV of Hi$-$Tech using the data in Exhibit $4\mathrm{.}5,$ but assume that the company is cur$-$

rently not at its target capital structure, which in actuality is $30$ percent debt and $70$ percent equity. Also

assume the firm's cost of debt is $8$ percent.

What are the drawbacks of the NPV method?

Under what circumstances is it more useful to use the APV method than the NPV method?

Calculate the APV for Hi$-$Tech using the assumptions in Exhibit $4\mathrm{.}5,$ and assuming the firm takes on

$$100$ million debt at the time of the sale. At the end of each subsequent year to the sale, $$25$ million of

this debt is retired.

If a venture capitalist owns $20$ percent of a firm today, and the firm intends to undertake three addi$-$

tional rounds of financing, selling additional shares of the firm's equity of $20$ percent, $25$ percent, and

$20$ percent, calculate her retention ratio.

What are the criticisms of using high discount rates for the VC method? How do venture capitalists

justify their use?

Under what circumstances is using the option pricing model more useful than the discounted cash$-$

flow method?

What are some of the difficulties regulators face regarding portfolio company valuations?Compare and

contrast how FASB and PEIGG define fair value. Which do you agree with? Why?