Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Vic Nguyen, CEO of NewVenture, seeks to raise $5 million in a private placement of equity in his early stage venture. Nguyen conservatively projects net

image text in transcribed
Vic Nguyen, CEO of NewVenture, seeks to raise $5 million in a private placement of equity in his early stage venture. Nguyen conservatively projects net income of $5 million in year five and knows that comparable companies trade at a price earnings ratio of 20X. Maria Garcia of Growing Seeds Capital likes Vic Nguyen's business plan, but thinks it naive in one respect: to recruit a senior management team, she believes Vic will have to grant generous stock options in addition to the salaries projected in his business plan. From past experience, she thinks management should have the ability to own at least a 15% share of the company by the end for year 5. Given her beliefs, estimate the share of the company Maria should insist on today if her required rate of return is 50%. Then estimate how many shares she would she get. What would be the price per share? Make sure to detail the work on paper and submit a photo at the end of the exam to avoid penalty $6.19 $4.23 12.63 $9.10 Vic Nguyen, CEO of NewVenture, seeks to raise $5 million in a private placement of equity in his early stage venture. Nguyen conservatively projects net income of $5 million in year five and knows that comparable companies trade at a price earnings ratio of 20X. Maria Garcia of Growing Seeds Capital likes Vic Nguyen's business plan, but thinks it naive in one respect: to recruit a senior management team, she believes Vic will have to grant generous stock options in addition to the salaries projected in his business plan. From past experience, she thinks management should have the ability to own at least a 15% share of the company by the end for year 5. Given her beliefs, estimate the share of the company Maria should insist on today if her required rate of return is 50%. Then estimate how many shares she would she get. What would be the price per share? Make sure to detail the work on paper and submit a photo at the end of the exam to avoid penalty $6.19 $4.23 12.63 $9.10

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Conflict Resolution

Authors: Oliver Ramsbotham, Tom Woodhouse, Hugh Miall

3rd Edition

0745649742,1509509542

More Books

Students also viewed these Finance questions