Question 1

A venture capitalist wants to estimate the value of a new venture. The venture is not expected to produce net income or earnings until the end of year 5 when the net income is estimated at $1,500,000. A publicly-traded competitor or comparable firm has current earnings of $1,000,000 and a market capitalization value of $10,000,000. Estimate the value of the new venture at the end of year 5. No commas, no decimal points.

Question 2

Use below case for Q2-6.

R.K. Maroon is a seed-stage web-oriented entertainment company with important intellectual property. RKMs founders, all technology experts in the relevant area, are anticipating a quick leap to dot-com fortune and believe that their unique intellectual property will allow them to achieve a subsequent (year 3) $100,000,000 venture value with a one-time initial $2,000,000 in venture financing.

In contrast, similar dot-commers in their niche are currently seeking multistage financing amounting to $10,000,000 to achieve comparable results. The founders have organized with 1,000,000 shares and are willing to grant venture investors a 100% return on their business plan projections.

What percent of ownership must be sold to grant the 100% three-year return? Type in percentage units, no decimal points.

Question 3

What is the number of new shares issued? Round it to the nearest whole number, no decimal points, no comma.

Question 4

What is the issue price per share? Round by two decimal points.

Question 5

What is the pre-money valuation? Round it to the nearest whole number, no commas, no decimal places.

Question 6

What is the post-money valuation? Round it to the nearest whole number, no commas, no decimal places.

Question 7

Q7-Q11 are optional bonus items for extra 1 point. Use below information.

Assuming a second round in year 2 of $8,000,000 with a 40% return. What is the percent of ownership that is sold at the 2nd round? Type in percentage units, round by one decimal point. No comma, use period

Question 8

Assuming a second round in year 2 of $8,000,000 with a 40% return. What is the number of new shares issued at the 2nd round? Round it by nearest whole number.

Question 9

Assuming a second round in year 2 of $8,000,000 with a 40% return. What is the price per share at the 2nd round? Round it to the nearest whole number.

Question 10

Assuming a second round in year 2 of $8,000,000 with a 40% return. What is the pre-money valuation at the 2nd round? Round by the nearest whole number, no decimal points.