Questions from Entrepreneurial Finance

Q: Calculate the discount rate consistent with a cap rate of 12%

Calculate the discount rate consistent with a cap rate of 12% and a growth rate of 6%. Show how your answer would change if the cap rate dropped to 10 percent while the growth rate declined to 5 perc...

Q: A venture investor wants to estimate the value of a venture.

A venture investor wants to estimate the value of a venture. The venture is not expected to produce any free cash flows until the end of year 6 when the cash flow is estimated at $2,000,000 and is ex...

Q: If the new offering price was $.80 for 1,500

If the new offering price was $.80 for 1,500 shares. Assume other things remain the same.

Q: First- and second-round required returns of 55% and

First- and second-round required returns of 55% and 40% (instead of the original 50% and 25%). Interpret your results as they relate to the founders’ ownership and the feasibility of the financing.

Q: Suppose you are considering a venture conducting a current financing round involving

Suppose you are considering a venture conducting a current financing round involving an issue of 100,000 new shares at $3. The existing number of shares outstanding is 200,000. What are the related...

Q: A venture capitalist firm wants to invest $1.5 million

A venture capitalist firm wants to invest $1.5 million in your NYDeli dot.com venture that you started six months ago. You do not expect to make a profit until year four when your net income is expec...

Q: Calculate the after-tax WACC for a firm with a 25

Calculate the after-tax WACC for a firm with a 25 percent tax rate, a 10 percent cost of debt, a 30 percent cost of equity and a target debt-to-value of .30. Explain how investing to provide the WA...

Q: Given a WACC of 15 percent, a target debt-to

Given a WACC of 15 percent, a target debt-to-value of .5, a tax rate of 28 percent and a cost of debt of 10 percent, what is the implied cost of equity?

Q: Assume a venture has a perpetuity enterprise value cash flow of $

Assume a venture has a perpetuity enterprise value cash flow of $800,000. Cash flows are expected to continue to grow at 8 percent annually and the venture’s WACC is 15 percent. A. Calculate the vent...

Q: The venture investors and founders of the ACE Products venture, a

The venture investors and founders of the ACE Products venture, a closely held corporation, are contemplating merging the successful venture into a much larger diversified firm that operates in the sa...