PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 15, Problem 6PS
a)
Summary Introduction
To determine: Total number of shares needs to sell to raise the additional capital of $1,000,000.
b)
Summary Introduction
To determine: Margin of stake owned by Company M managers after venture capital investment.
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3.Mr. Wise Sapi invested 50M in the common shares of Profitable Ventures, Inc. What if the guaranteed return for this investment is 5M and prior to the issuance of dividends, the management decided to retain all earnings. What will make Mr. Sapi happy? (the tenor must be in the context of investment)
A. If his increased capitalization will allow him to extract returns higher than the prevailing market rate
B. If his increased capitalization will allow him to extract returns equal to the prevailing market rate
C. If his increased capitalization will allow him to extract returns lower than the prevailing market rate
D. If he will receive 5M as dividends
You have started a company and are in
luck—a
venture capitalist has offered to invest. You own
100%
of the company with
4.96
million shares. The VC offers
$1.12
million for
820,000
new shares.
a. What is the implied price per share?
b. What is the post-money valuation?
c. What fraction of the firm will you own after the investment?
A venture capitalist wants to estimate the value of a new venture. The venture is not expected to produce net income or earnings until the end of year 5 when the net income is estimated at $1,600,000. A publicly traded competitor or “comparable firm” has current earnings of $1,000,000 and a market capitalization value of $10,000,000.
a.Estimate the value of the new venture at the end of year 5. Show your answer using both direct comparison method and the direct capitalization method. What assumption are you making when using the current price-to-earning relationship for the comparable firm?
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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