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John Smith, ceo of ReaseachNews inc., wants to raise $10M in Series A preferred stock from Greylock partners. Greylock partners projects that ResearchNews will reach an EBITDA of $100M in 10 years, at which time comparable companies are forecasted to be valued at 5 times EBITDA. Greylock Partners expects a 3X return on their investment.
A) What will the value of the firm be in 10 years (i.e., at exit)?
B) What is the minimum % share of the company Greylock Partners would require today to invest $10M in ResearchNews?
C) Suppose ResearchNews has 1 million shares outstanding before Greylock Partners's investment, and that Greylock Partners wants 20% ownership of ResearchNews for their investment. How many shares should Greylock Partners ask for? What is Greylock Partner's price per share?
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The Economist quotes 6.00% for the Treasury bill with a par value of $100,000 due two months from now. What is the effective annual yield on the bill?
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The market price of ZYX stock has been volatile and you expect that volatility to continue for a few weeks based on recent news. Due to this belief you decide to purchase calls and puts to manage your exposure. You also purchase a one-month put optio..
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Kerron Company is presented with the following two mutually exclusive projects. The required return for both projects is 17 percent. Year Project M Project N 0 –$145,000 –$360,000 1 64,000 150,000 2 82,000 185,000 3 73,000 135,000 4 59,000 115,000. W..
The initial cost of the fixed assets is $61,000. These assets will be worthless at the end of the project. An additional $4,500 of net working capital will be required throughout the life of the project.
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