Spatial Technology Case: Available in All Versions of the Textbook

Part 1

1. Evaluate the compound return on investments made at Start up, Round A, Round B, Round C and Round D if the acquired shares eventually sell at $10 and $5. This will be one number per round per price. (Hint: Use the XIRR function in Excels Analysis Toolpack.)

2. Evaluate the compound return on the overall portfolio of investments for each existing investor. This will be one number per investor. (Hint: Use the XIRR function in Excels Analysis Toolpack.)

3. Compare the $5 and $10 IPO prices for Spatial to comparable firms and their multiples. (There are some glimpses of multiples in the case materials, but you may wish to use some outside reference material please state your sources, if any.)

4. In a single page, display legible tables for: (i) round prices, investor cash flows and exit payoffs with their associated compound annualized returns at both $5 and $10; (ii) any comparable firm valuation data you deem relevant. This single page of two tables will be the only portion of Part 1 carried into the final report submitted in Part 2.

Part 2

5. Using the case-provided financial statements as a starting point:

1. Prepare a DCF valuation based on projected financials (IS, BS and SCF) with 5 years of explicit forecasts using an overall revenue growth rate consistent with recent history (say 2-3 years) at Spatial. For the terminal value use a reasonable perpetual growth rate.

2. Engineer DCF valuations and pro forma financial statements (5-year explicit period) that justify a $10 and a $5 share price at the IPO. Make sure the ratios embedded in your projections conform to reasonable operating ratio assumptions. (Hint: dont just change sales growth vary other parameters of your projections!)

3. Prepare your $5 scenario, complete with IS, BS, SCF and DCF valuation, for presentation in the final submission.

4. Prepare a summary comparison (without financial statements) of the drivers and results for all 3 scenarios (recent growth rate, $5 engineer and $10 engineer). Display the $5 financials, valuation and summary comparison legibly in no more than 2 pages of exhibits. With the IRR and comparables summary from Part 1, this completes the 3 pages of exhibits for your final submission.

5. Prepare a one-page Executive Summary (as per the instructions in the syllabus) discussing the events and decisions (technological and financial) leading to Spatials current situation, the options it currently has and your recommendations for its near future. Would (could) you have done anything differently? Take a position on whether you would recommend the $5 IPO to investors. Take a position on whether, as an investor, you would have purchased shares in the $5 IPO. Discuss what you believe will be the strategic (product lines, licensing, competitors, etc.) outlook for Spatial and what you believe will be the financial markets view of a publicly-traded Spatial. Make sure your executive summary references the exhibits.