Reference no: EM131604929
Question: R.K. Maroon (RKM) is a seed-stage, Web-oriented entertainment company with important intellectual property. RKM's founders, all technology experts in the relevant area, are anticipating a quick leap to dot-com fortune and believe that their unique intellectual property will allow them to achieve a subsequent (Year 3) $100 million venture value with a one-time initial $2 million in venture financing.
In contrast, similar dot-com firms in their niche are currently seeking multistage financing amounting to $10 million to achieve comparable results. The founders have organized with one million shares and are willing to grant venture investors a 100 percent return on their business plan projections.
A. What percent of ownership must be sold to grant the 100 percent three-year return?
B. What is the resulting configuration of share ownership?
C. Suppose the venture investors don't buy the business plan predictions and want to price the deal assuming a second round in Year 2 of $8 million with a 40 percent return. What changes?
D. Suppose the venture investors agree with the founders' assessment, price the deal accordingly, and turn out to be wrong (an additional $8 million at 40 percent must be injected for the final year).
1. What is the impact on the founders' and round-one investors' final ownership assuming the second round is funded by outsiders?
2. Compare these results to your results for Part C.
3. Who bears the dilution from an anticipated round?
4. Who bears the dilution from an unanticipated round?
E. Suppose that the deal is priced assuming the second round (as in Part C) and it turns out to be unnecessary.
Comment on the final ownership percentages at exit (Year 3). What do you conclude about the impact of anticipated but unrealized subsequent financing rounds?
Define negative impacts of the industrial revolution
: Identify three of the most environmentally negative impacts of the Industrial Revolution and justify your choices. For example, the invention of the automobile.
|
Discuss about the limits of the truth
: What do you do with what you know? Is it sufficient to answer what you re asked or to reveal everything that you know about a particular situation?
|
What is a constant growth stock
: Your employer, a mid-sized human resources management company, is considering expansion into related fields, including the acquisition of Temp Force Company.
|
What were the origins of the asian currency crisis
: How did the appreciation of the U.S. dollar and depreciation of the yuan affect the timing and magnitude of the Asian currency crisis?
|
What is the resulting configuration of share ownership
: R.K. Maroon (RKM) is a seed-stage, Web-oriented entertainment company with important intellectual property. RKM's founders, all technology experts.
|
What is the monthly return on this investment vehicle
: Live Forever Life Insurance Co. is selling a perpetuity contract that pays $1,500 monthly. The contract currently sells for $115,000.
|
Identify important or significant changes in families
: Identify important or significant changes in families since 1960. What factors are responsible for change? What proposals do you have to strengthen the family?
|
Calculate the firm current ratio and acid-test ratio
: Question - A firm's balance sheet has the following data: Cash on hand $450,000. The firm's current ratio and acid-test ratio are closest to what values
|
Analyze the opportunities for strategic change
: Analyze the opportunities for strategic change that are evident, citing evidence.
|