Question: How much is terminal value and how was it derived? What are the required returns for each investor's specific round of financing? How do they
- How much is terminal value and how was it derived?
- What are the required returns for each investor's specific round of financing? How do they compare to each other and why are they different?
- What is the process used to determine an investor's present value relative to their round of financing?
- Why did the owners desire to hold back 15% for employee incentive stock plans? As a prospective investor is this a welcome provision? Why or why not?
A B C D G H T J K L M N 0 P Q R S % of Ownership After Round of Funding Earnings at Terminal Value Millions Terminal Year Financing Amount in Round Millions 1 $ 6 2 $ 8 3 $ 12 2 3 4 5 Merited PE at Respective values at Value specific year % Ownership $ 14.31 41.9% $ 62.47 12.8% $ 142.01 8.5% 20 $ 240 Required Return 60% 40% 30% Retention Ratio Per Round 63.7% 76.6% 85.0% % Ownership at Round with retention 65.8% 16.7% 9.9% 0 Round 1 65.80% Investor shares at funding round 1,923,849.11 587,356.78 387,585.76 Total issued shares Price per share Post Money Value Pre-Money Value 2,923,849.11 $ 3.12 $ 9,118,747.71 $ 3,118,747.71 3,511,205.89 $ 13.62 $ 47,823,823.41 $ 39,823,823.41 3,898,791.65 $ 30.96 $ 120,710,059.17 $ 108,710,059.17 Orig. Owners Round 2 54.8% 16.7% 2 Round 3 49.3% 15.1% 9.9% 25.6% After Incentive Pool 41.9% 12.8% 8.5% 21.8% 15% 100.00% 4 6 6 $ 12 34.20% 28.5% Total Ownership 100.00% 100.00% 100.00% 15% 1,000,000 7 8 Retained for Employee incentive pool 9 Number of shares outstanding at time 0 10 11 12 13 A B C D G H T J K L M N 0 P Q R S % of Ownership After Round of Funding Earnings at Terminal Value Millions Terminal Year Financing Amount in Round Millions 1 $ 6 2 $ 8 3 $ 12 2 3 4 5 Merited PE at Respective values at Value specific year % Ownership $ 14.31 41.9% $ 62.47 12.8% $ 142.01 8.5% 20 $ 240 Required Return 60% 40% 30% Retention Ratio Per Round 63.7% 76.6% 85.0% % Ownership at Round with retention 65.8% 16.7% 9.9% 0 Round 1 65.80% Investor shares at funding round 1,923,849.11 587,356.78 387,585.76 Total issued shares Price per share Post Money Value Pre-Money Value 2,923,849.11 $ 3.12 $ 9,118,747.71 $ 3,118,747.71 3,511,205.89 $ 13.62 $ 47,823,823.41 $ 39,823,823.41 3,898,791.65 $ 30.96 $ 120,710,059.17 $ 108,710,059.17 Orig. Owners Round 2 54.8% 16.7% 2 Round 3 49.3% 15.1% 9.9% 25.6% After Incentive Pool 41.9% 12.8% 8.5% 21.8% 15% 100.00% 4 6 6 $ 12 34.20% 28.5% Total Ownership 100.00% 100.00% 100.00% 15% 1,000,000 7 8 Retained for Employee incentive pool 9 Number of shares outstanding at time 0 10 11 12 13
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