Suppose you need a total of $100 M in financing, $40 M of which is needed right away and remainder in one year. Next year, news about product development prospects will have come out. Probability of good news is 80% with certain payoff of $400 M. Probability of bad news is 20% with 10% chance of success (payoff $400 M) and 90% chance of complete failure of product. a) What is value of company with staging? Without staging? Why is value different? b) What is the VC ownership and founder ownership if funding is not staged? c) What is VC ownership and founder ownership if funding is staged?
Suppose you need a total of $100 M in financing, $40 M of which is needed right away and remainder in one year. Next year, news about product development prospects will have come out. Probability of good news is 80% with certain payoff of $400 M. Probability of bad news is 20% with 10% chance of success (payoff $400 M) and 90% chance of complete failure of product. a) What is value of company with staging? Without staging? Why is value different? b) What is the VC ownership and founder ownership if funding is not staged? c) What is VC ownership and founder ownership if funding is staged?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter14: Real Options
Section: Chapter Questions
Problem 4MC
Related questions
Question
Q3
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning