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Suppose EBV is considering a $5M Series A investment in Newco. EBV proposes to structure the investment as RP with APP of $4M plus 5M shares of common stock. (We refer to this basket of RP plus common as "series A") The employees of Newco have claims on 15M shares of common stock. Following the Series A investment Newco will have 20M common shares outstanding. The $100M EBV fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits with committed capital as base. Expected GVM is 2.5 and GP% = 10%.
Which of the following is the correct decision and rationale?
A. GPs will invest, since the implied valuation for GP stake is positive. B. GPs will invest, since the implied pre-money valuation for GP stake is positive. C. GPs will reject, since GPS will charge management fee. D. None of the above.
Estimate the beta for your firm if your projects have similar betas, but your firm will carry a debt/asset ratio of 1/3.
Recommendation on minimising of investment risk based on current trends and implication
Relay Inc. keeps a constant debt to equity ratio policy equal to 0.8 and its wacc is 13%. The company has an expected net income equal to $12,054,021 for next year and its assets are completely depreciated. If the corporate tax rate is 34%o what is t..
You are an investment banker advising a Euro bank about a new international bond offering it is considering. The proceeds are to be used to fund Eurodollar loans to bank clients. What type of bond instrument would you recommend that the bank consider..
Kaufman Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 10% annual coupon payment, and their current price is $1,175. The bonds may be called in 5 years at 109% of face value (Call price = $1,..
Calculate the operating cash flow for Year 1.
The AAAA Company has 100,000 shares outstanding and 20,000 warrants outstanding. Each warrant has a maturity of one year and gives the holder the right to buy one new share from AAAA Company for $50. Suppose the premium on a call option (on AAAA Co. ..
Find an article that discusses how a company used the Balanced Scorecard for strategic performance measurement. Summarize and provide an analysis of the article (3-4 pages). Remember to properly cite the source.
A project that provides annual cash flows of $17,300 for nine years costs $79,000 today. What is the NPV for the project if the required return is 8 percent?
Consider a 10-year project with the following information: initial fixed asset investment = $480,000; straight-line depreciation to zero over the 10-year life; zero salvage value; price = $34; variable costs = $15; fixed costs = $206,400; quantity so..
Why do you think the company is maintain a zero-debt policy as cost of debt is lower than cost than cost of equity?
Last year, you earned a rate of return of 8.16 percent on your bond investments. During that time, the inflation rate was 2.89 percent. What was your real rate of return? Use the exact relationship between real and nominal rates.
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