One of promising startups invites you to become an investor on a private round. Despite an age, it is organised in the form of closed corporation. It is 31/12 and you feel as a New Year gift should be really valuable.

You are given some financials regarding past performance.

Initially, it has been authorised 2m of shares and half of that is issued.

Data regarding past year sales, current years sales and the next one’s projection is as following: 10m 15m and 25m

Net Income margin is 20% for the current year and should increase by 5 percentage points next two years according to the strategy.

Common Stock has a par of 1 and no premiums at all.

Retained earnings for the beginning of current year was 10m

Working capital is projected at 5% of revenues in all susequent years as well as 10% of Capex in R&D.

Intangible assets of 1m are amortizing linearly over 5 years period.

Company just received a first loan of 5m and expects to maintain 30% dividend payout ratio.

Q1 (10) You know that AGM just approved stock dividend of 10%. How Book value per share is going to be changed after its issuance in nearest days?

Q2 (10) How many shares you would require to participate in 2-years agreement? After that your shares are repurchased and you make an exit.

Q3 (10) How the Book Value Per Share will change after two years? Which shareholder's protection you may demand if want to invest not for 2 years but forever? Be detailed as possible and provide any calculations if required.

Answer rating: 100% (QA)

Q1 The issuance of a 10 stock dividend means that the company will issue new shares equal to 10 of the outstanding shares Since the company initially authorized 2 million shares and half of that is is... View the full answer