14. Facts: - Einstein Industries needs to raise $3,000,000 to execute its business plan. Piper Venture...

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14. Facts: - Einstein Industries needs to raise $3,000,000 to execute its business plan. Piper Venture Partners (PVP) will invest the $3,000,000 in a Series A financing round if the parties can reach agreement on PVP's ownership percentage. The parties agree that the time to exit should be at the end of 4 years at which point Einstein should have sales of $10,000,000. -PVP requires a 50% compound annual rate of return. No further financing is contemplated prior to exit. - Einstein's founder owns 1,000,000 shares of common stock in the company. - A similar venture, Bailey Corp., was recently acquired at a $28,000,000 Enterprise Value. In the last 12 months (LTM), Bailey Corp's sales were $7,000,000. (20 points) Answer the following questions using the Venture Capital Method: (a) Calculate the exit value of Einstein Industries based on a 4-year exit (b) Calculate the present value using PVP's required rate of return (c) What percentage ownership will PVP expect for its $3,000,000 Series A investment? (d) How many shares will PVP expect to receive and what price per share will they offer to pay? (e) Summarize the shares and ownership percentages in a Capitalization Table WRITE YOUR ANSWERS ON THE ACCOMPANYING ANSWER SHEET SHOW YOUR WORK HERE FOR PARTIAL CREDIT 14. Facts: - Einstein Industries needs to raise $3,000,000 to execute its business plan. Piper Venture Partners (PVP) will invest the $3,000,000 in a Series A financing round if the parties can reach agreement on PVP's ownership percentage. The parties agree that the time to exit should be at the end of 4 years at which point Einstein should have sales of $10,000,000. -PVP requires a 50% compound annual rate of return. No further financing is contemplated prior to exit. - Einstein's founder owns 1,000,000 shares of common stock in the company. - A similar venture, Bailey Corp., was recently acquired at a $28,000,000 Enterprise Value. In the last 12 months (LTM), Bailey Corp's sales were $7,000,000. (20 points) Answer the following questions using the Venture Capital Method: (a) Calculate the exit value of Einstein Industries based on a 4-year exit (b) Calculate the present value using PVP's required rate of return (c) What percentage ownership will PVP expect for its $3,000,000 Series A investment? (d) How many shares will PVP expect to receive and what price per share will they offer to pay? (e) Summarize the shares and ownership percentages in a Capitalization Table WRITE YOUR ANSWERS ON THE ACCOMPANYING ANSWER SHEET SHOW YOUR WORK HERE FOR PARTIAL CREDIT