14. Using the following information, please answer the questions about Surelock Homes, a startup company. In your analysis, assume the page 384 valuation date is the end of year 6, projected earnings in year 6 will be $12 million, and an appropriate price-to-earnings ratio for valuing these earnings is 20 times. Financing Round Amount in millions $6 8 1 2 3 12 Year 0 2 4 Required Return 60% 40% 30% In addition, the company wants to reserve 15 percent of the shares outstanding at time 6 for employee bonuses and options. a. What percentage ownership at time 0 should round 1 investors demand for their $6 million investment? b. If Surelock presently has 1 million shares outstanding, how many shares should round 1 investors demand at time 0? c. What is the implied price per share of Surelock stock at time 0?
14. Using the following information, please answer the questions about Surelock Homes, a startup company. In your analysis, assume the page 384 valuation date is the end of year 6, projected earnings in year 6 will be $12 million, and an appropriate price-to-earnings ratio for valuing these earnings is 20 times. Financing Round Amount in millions $6 8 1 2 3 12 Year 0 2 4 Required Return 60% 40% 30% In addition, the company wants to reserve 15 percent of the shares outstanding at time 6 for employee bonuses and options. a. What percentage ownership at time 0 should round 1 investors demand for their $6 million investment? b. If Surelock presently has 1 million shares outstanding, how many shares should round 1 investors demand at time 0? c. What is the implied price per share of Surelock stock at time 0?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
3
Transcribed Image Text:14. Using the following information, please answer the questions about Surelock Homes, a startup company. In your analysis, assume the
valuation date is the end of year 6, projected earnings in year 6 will be $12 million, and an appropriate price-to-earnings ratio for valuing
these earnings is 20 times.
Year Required Return
ITIE
$6
8
12
Financing Round Amount in millions
1
2
3
2
4
60%
40%
30%
In addition, the company wants to reserve 15 percent of the shares outstanding at time 6 for employee bonuses and options.
a. What percentage ownership at time 0 should round 1 investors demand for their $6 million investment?
b. If Surelock presently has 1 million shares outstanding, how many shares should round 1 investors demand at time 0?
c. What is the implied price per share of Surelock stock at time 0?
d. What is Surelock's pre-money value at time 0? What is its post-money value?
page 384
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education