5. StartCo is an early stage company whose financial plans call for the company to be sold...
Question:
5. StartCo is an early stage company whose financial plans call for the company to be sold in 5 years, at a valuation of $10 million. You are considering an investment of $100,000 in StartCo;
you like the company but feel that it is a fairly risky venture, so you want a 40% annual return on your investment.
a. What is the present value of StartCo, using your required rate of return as the discount rate?
b. What % of the company would you expect to receive for your $100,000?
c. If there are 750,000 shares of StartCo already outstanding, out of 10 million shares authorized, how many shares will there be after you invest your $100,000?
d. How many shares will you be purchasing, and at what price?
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen