An investor purchases shares of a company at $55. The company paid a $3 annual dividend which
Fantastic news! We've Found the answer you've been seeking!
Question:
What is the expected return per year on this transaction?
Transcribed Image Text:
A fictitious VC firm, EBV, that is considering a series A investment in a start-up company named Newco. The terms specify that EBV invests $5 million for 5M shares into Newco, which currently has 10M shares allotted to employees and founders. Security structure is as follows: First pay [one] times the Original Purchase Price on each share of Series A Preferred. Thereafter, the Series A Preferred participates with the Common Stock pro rata on an as-converted basis. Each share of Series A Preferred (PCP) will automatically be converted into Common Stock with QPO at $5 per share. if the exit is $72, how much is the distribution to the VC? A fictitious VC firm, EBV, that is considering a series A investment in a start-up company named Newco. The terms specify that EBV invests $5 million for 5M shares into Newco, which currently has 10M shares allotted to employees and founders. Security structure is as follows: First pay [one] times the Original Purchase Price on each share of Series A Preferred. Thereafter, the Series A Preferred participates with the Common Stock pro rata on an as-converted basis. Each share of Series A Preferred (PCP) will automatically be converted into Common Stock with QPO at $5 per share. if the exit is $72, how much is the distribution to the VC?
Expert Answer:
Answer rating: 100% (QA)
To calculate the expected return per year on this transaction we need to consider both the dividend ... View the full answer
Related Book For
Venture capital and the finance of innovation
ISBN: 978-0470454701
2nd Edition
Authors: Andrew Metrick
Posted Date:
Students also viewed these finance questions
-
A fictitious VC firm, EBV, that is considering a series A investment in a start-up company named Newco. The terms specify that EBV invests $5 million for 5M shares into Newco, which currently has 10M...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Subject : Strategic Management in a Global Environment Safaricom: Innovative Telecom Solutions to Empower Kenyans As the largest mobile provider in Kenya, Safaricom has touched the lives of Kenyans...
-
Determine whether each relation defines y as a function of x. Give the domain. Identify any linear functions. y = |x|
-
An analyst develops the following pro forma at the end of 2009 (in millions): a. Forecast the cum-dividend operating income growth rate for 2011 using a 9 percent return for reinvesting cash flows....
-
In Problems 1518, solve the inequality by using the graph of the function. Solve R(x) 0, where R(x) 3x + 3 2x + 4
-
As a gambling facility, MGM Desert Inn, Inc., regularly holds and executes negotiable instruments. During a period of two months, patron William E. Shack Jr. entered MGM and delivered eight checks to...
-
Almas Recording Studio rents studio time to musicians in 2-hour blocks. Each session includes the use of the studio facilities, a digital recording of the performance, and a professional music...
-
Shape Color Label Circle Blue 1 Circle Blue 0 Circle Green 0 Diamond Blue 0 Diamond Green 0 Diamond Green 0 Diamond Red 1 Square Blue 1 Square Square Red 1 Red 1 (a) What are the parameters of the...
-
Richard and Christine McCarthy have a 19-year-old son (born 10/2/99; Social Security number 555-55-1212), Jack, who is a full-time student at the University of Key West. Years ago, the McCarthys...
-
1. On Dec. 31, 2020, Mary sold a piece of investment land for $1M (basis = $200,000). Mary received $100,000 cash on Dec. 31, 2020 and a $900,000 note. The note calls for three annual installment...
-
Go to www.gamedev.net/page/resources/_/business/business-and-law/critical-path-analysis-and-scheduling-for-game-r1440 and click around the site. There are several articles on how to run your own...
-
The ELV (extra low voltage) project, which was meant to install, test, and commission IT, communications infrastructure, and services for the Five Star Hotel in Bahrain, concluded in 2011. The...
-
Calculate the fully loaded cost of labor for a project team member using the following data: Hourly rate: $52/hr Hours needed: 120 Overhead rate: 60%
-
Knut Yrvin functions as the team leader for an initiative to replace proprietary operating systems with Linux-based technology in schools in Norway (the project is named Skolelinux). Read his...
-
You have been tasked with advising senior management on whether to invest in a project that will involve purchasing a new piece of high-spec software for greater efficiency in supply and demand...
-
Use the sign chart for y=f(x) below to determine where f(x) > 0 f(x) +++ I Choose all that apply. (-1,1] (-4,-1) O [3,00). 0 (-, -4] O (1,3) 0 [1,3) (-4,-1) (3,00) [-1,1) Und. 1 +++ Und. +++
-
a) Calculate the goodwill that was paid by Major Ltd on the acquisition of Minor Ltd. [10 marks] b) Prepare the consolidated statement of financial position for Major Ltd at 31 July 20X8. [30 marks]...
-
Same setup as Exercise 14.3, except that now EBV is considering two additional structures: Alternative I: A 2X liquidation preference on the CP; or Alternative II: A cumulative compound dividend of...
-
True, False, or Uncertain: Early stage venture capital should earn a higher expected return than later-stage venture capital, because early stage ventures have a higher failure rate than later-stage...
-
Begin with the same setup as Example 22.2: Fuelcos investment in Project C. Now, in addition to the assumptions made in the example, we add an additional possibility: Fuelco has an option to sell the...
-
You are studying survival times for mice given a drug at one of three doses (Low, Medium, or High). You define two dummy variables: (a) With these definitions, write the expressions for the mean...
-
The data in Table 8.25 were collected in order to study factors affecting the supply and demand for commercial air travel. Data on various aspects of commercial air travel for an arbitrarily chosen...
-
It is beneficial to be able to estimate the yield of useful product of a tree based on measurements of the tree taken before it is harvested. Measurements on four such variables were taken on a...
Study smarter with the SolutionInn App