PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 15, Problem 5PS
a)
Summary Introduction
To determine: Total after-the-money valuation of the firm.
b)
Summary Introduction
To determine: Price per share that venture capitalist is placing an order.
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Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $1,346,400 to support its expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for the investment, the VC will hold 20,400 shares in the company and the two entrepreneurs will have combined holdings of 30,600 shares.
a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.)
b. What value is the venture capitalist placing on each share?
Ethelbert.com is a young software company owned by two entrepreneurs. It currently needs to raise $700,000 to support its
expansion plans. A venture capitalist is prepared to provide the cash in return for a 40% holding in the company. Under the plans for
the investment, the VC will hold 14,000 shares in the company and the two entrepreneurs will have combined holdings of 21,000
shares.
a. What is the total after-the-money valuation of the firm? (Enter your answer in dollars not millions.)
Valuation of the firm
b. What value is the venture capitalist placing on each share?
Value of each share
Question
What is primary and secondary market? An IPO is undertaken on primary or secondary market?
What is the essential job of an investment banker?
Why a stock exchange is called an auction market?
What are the five basis principles of finance?
Your company is considering choosing one of the two projects: Project Gold and Project Diamond. Each project will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9%. The cash flows of the two projects are provided below.
Gold
Diamond
Cost
$485 000
$520 000
Future Cash Flows
Year 1
Year 2
Year 3
Year 4
Year 5
105 850
153 250
225 650
245 000
250 350
117 050
162 400
275 500
255 000
260 000
Required: Identify which project should your company accept based on Discounted Payback Period method if the payback criterion is maximum of 2.5 years.
Chapter 15 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 15 - Vocabulary Each of the following terms is...Ch. 15 - Prob. 2PSCh. 15 - Vocabulary Here is a further vocabulary quiz....Ch. 15 - Stock issues True or false? a. Venture capitalists...Ch. 15 - Prob. 5PSCh. 15 - Prob. 6PSCh. 15 - Prob. 7PSCh. 15 - Venture capital Complete the passage using the...Ch. 15 - Venture capital a. A signal is credible only if it...Ch. 15 - IPOs Refer to Section 15.1 and the Marvin...
Ch. 15 - Prob. 11PSCh. 15 - Prob. 12PSCh. 15 - Issue costs In April 2019. Van Dyck Exponents...Ch. 15 - Underpricing In same U.K. IPOs, any investor may...Ch. 15 - Prob. 15PSCh. 15 - Prob. 16PSCh. 15 - Underpricing Construct a simple example to show...Ch. 15 - Prob. 18PSCh. 15 - Prob. 19PSCh. 15 - Costs of a general cash offer Why are the costs of...Ch. 15 - Prob. 21PSCh. 15 - Prob. 22PSCh. 15 - Rights issues In 2012, the Pandora Box Company...Ch. 15 - Prob. 24PSCh. 15 - Rights issues vs. cash offers Suppose that instead...Ch. 15 - Private placements You need to choose between...Ch. 15 - Prob. 27PSCh. 15 - Prob. 28PSCh. 15 - Dilution Here is recent financial data on Pisa...
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