A start-up company needs $2 Million funds to finance their growth. A venture capitalist approached the shareholders to provide them with the funds needed but the required return per year demanded is 40% for the next 5 years.

Estimated EBITDA of the firm for the current year is $200,000 which is expected to be increased by 30% per year. Estimated EBITDA multiple at the end of year 5 is 20 while the company expects to have $300,000 cash and no interest-bearing debt at that time.

Calculate:

2. The percentage of ownership to be given to venture capitalist  (4 marks)
4. Post Money and Pre Money values (2 marks)

Answer rating: 100% (QA)

Calculations for the StartUp Company 1 Terminal Value Year 5 Projected EBITDA in Year 5 200000 1 305 ... View the full answer