Reference no: EM13560476
1. [Venture Capital (VC) Method Valuation Concepts] Benito Gonzalez, founded and grew the BioSystems Manufacturing Corporation over a several year period. However, Benito has decided to exit BioSystems as of the end of 2010 with the intention of starting a new entrepreneurial venture. The Fuji Electronics Company is considering acquiring BioSystems which is 60 percent owned by Benito Gonzalez with the other 40 percent of the equity being held by venture investors who also desire to exit the venture. BioSystems' sales are expected to grow from the 2010 level at a 20 percent annual compound rate over each of the next three (2011, 2012, 2013) years. Cost of goods sold, marketing, depreciation, and interest expenses are expected to move or vary with sales (i.e., they are variable expenses). General and administrative (G&A) expenses are expected to remain constant each year (i.e., are fixed expenses). The income tax rate is expected to be 35 percent.
BIOSYSTEMS MANUFACTURING CORPORATION
Income Statement for 2010 ($ Thousands)
Net Sales $10,000
Cost of Goods Sold 6,000
Gross Profit 4,000
Marketing Expenses 1,000
G&A Expenses 2,000
Depreciation 200
Interest 100
Income Before Taxes 700
Taxes (35%) 245
Net Income $455
A. Prepare BioSystems' income statements for 2013.
B. Fuji Electronics has examined other recent acquisitions in BioSystems' industry and believes that a 17 times price-earnings multiple would be appropriate for determining BioSystems value in the future. Calculate the value of BioSystems as of the end of 2013.
C. How much should Fuji Electronics be willing to pay for BioSystems Manufacturing at the end of 2010 if Fuji's management believes the appropriate discount rate is 25 percent?
D. What is Gonzalez's portion of the exit proceeds? What is the venture investors' portion of the exit proceeds?
E. Benito Gonzalez invested $50,000 of his own funds in BioSystems at the end of 2005. What would be the compound rate of return on his investment when the exit (sale to Fuji Electronics) from BioSystems occurs at the end of 2010?
F. The venture investors contributed $500,000 at the end of 2006. What would be their compound rate of return on their investment if BioSystems is sold at the end of 2010?
Charges problem
: A +30 µC charge is placed 40 cm from an identical +30µC charge. How much work would be required to move a +0.41µC test charge from a point midway between them to a point 5cm closer to either of the charges?
|
What is stopping distance now as measured along incline
: When a car is traveling at 25 m/s on level ground, the stopping distance is found to be 22m. This distance is measured by pushing hard on the brakes so that the wheels skid on the pavement. The same car is driving at the same speed down an incline th..
|
Accounting multiple choice questions
: Multiple Choice Questions (Enter your answers on the enclosed answer sheet) Anytime an owner removes any asset for personal use it is recorded as:
|
Calculate the enterprise value to net sales ratios
: Calculate the enterprise value to net sales ratios for each of the three competitors (EastTek, SouthTek, and NorthTek), as well as the average ratio for the competitors.
|
Venture capital vc method valuation concepts
: Fuji Electronics has examined other recent acquisitions in BioSystems' industry and believes that a 17 times price-earnings multiple would be appropriate for determining BioSystems value in the future. Calculate the value of BioSystems as of the end..
|
Terminal or horizon period valuation concepts
: The Gamma Systems Manufacturing Corporation has reached its maturity stage and its net sales are expected to grow at a 6 percent compound rate for the foreseeable future. Management believes that as a mature venture the appropriate equity discount r..
|
Valuation sensitivities to changes in growth rates
: [Valuation Sensitivities to Changes in Growth Rates and Discount Rates] Assume that some of the information relating to the Gamma Systems Manufacturing Corporation has changed. Using the financial statement data in Problem 5, answer the following qu..
|
Valuation impact of changes in forecast period growth rates
: Valuation Impact of Changes in Forecast Period Growth Rates, Use the financial statement information in Problem 5 and take into consideration that sales will grow at a 15 percent rate in 2011 and a 10 percent rate in 2012 before settling down to a 6..
|