-SleepWell is a private company -they are researching and developing a new treatment to help with insomnia...
Question:
-SleepWell is a private company
-they are researching and developing a new treatment to help with insomnia
-SleepWell is looking for external financing of $3.5 million for their new project
-They need this funding to issue clinical tests and apply for Investigational Drug with FDA
-SleepWell expects its first earnings of $2,000,000 in 5 years and will stay at that same level in the foreseeable future
-A venture investment company is interested in the project, and it predicts a P/E ratio of 16 times for SleepWell in 5 years, also the firm must have an annual return of 30% for this type of project
-At the moment, SleepWell has 1 million shares outstanding
Required
-What is the percentage of equity ownership for the venture investment company after this round of financing?
-How many new shares should SleepWell issue to the venture company and what is the share price?
Expert Answer:
To calculate the percentage of equity ownership for the venture investment company after this round ... View the full answer
