Answer options are: 521 million 1,021 million 1,188 million 1,688 million 2355 million zero The following is

Answer options are:

521 million

1,021 million

1,188 million

1,688 million

2355 million

zero
 

Transcribed Image Text:

The following is roughly true (believe it or not): Microstrategy is a B2B business intelligence software company founded, and run for many years, by eccentric 'Bitcoin Maximalist' Michael Saylor. Saylor is a prior MIT engineering grad, and self- made billionaire who became an ardent believer in Bitcoin around mid-2020 and has leveraged most of his 10-figure personal net worth and entire business net worth on Bitcoin. Saylor holds about 20,000 Bitcoin personally and Microstrategy, as a business, holds about 130,000 Bitcoin. Saylor owns 17% of Microstrategy. Assume Bitcoin is currently trading at $17,000 per BTC. Also, assume Microstrategy has about $500 million of total assets beyond Bitcoin, and that these other assets are simply cash (USD). Finally, assume Microstrategy has $2.3 Billion in debt, almost all of which was sold so that the company could purchase more Bitcoin, and that all of Microstrategy's debt is fixed-rate and maturing in 5 years. Also, the risk-free rate is 4%. Bitcoin's volatility is currently around 60% per year. What is the value of Microstrategy, valuing the business as a "real option" based on its Bitcoin holdings and current amount of debt (hint: how could the $500 million of cash be added into/seperated from this valuation to get the business' total value)? The following is roughly true (believe it or not): Microstrategy is a B2B business intelligence software company founded, and run for many years, by eccentric 'Bitcoin Maximalist' Michael Saylor. Saylor is a prior MIT engineering grad, and self- made billionaire who became an ardent believer in Bitcoin around mid-2020 and has leveraged most of his 10-figure personal net worth and entire business net worth on Bitcoin. Saylor holds about 20,000 Bitcoin personally and Microstrategy, as a business, holds about 130,000 Bitcoin. Saylor owns 17% of Microstrategy. Assume Bitcoin is currently trading at $17,000 per BTC. Also, assume Microstrategy has about $500 million of total assets beyond Bitcoin, and that these other assets are simply cash (USD). Finally, assume Microstrategy has $2.3 Billion in debt, almost all of which was sold so that the company could purchase more Bitcoin, and that all of Microstrategy's debt is fixed-rate and maturing in 5 years. Also, the risk-free rate is 4%. Bitcoin's volatility is currently around 60% per year. What is the value of Microstrategy, valuing the business as a "real option" based on its Bitcoin holdings and current amount of debt (hint: how could the $500 million of cash be added into/seperated from this valuation to get the business' total value)?

Answer rating: 100% (QA)

SOLUTION 2355 Million The value of Microstrategy valuing the ... View the full answer