How does a present value venture valuation pie differ from a future value valuation pie?
> Using the trend projection method, develop a forecasting model for the sales of Cool-Man air conditioners (see Problem 5-22). Problem 5-22: Sales of Cool-Man air conditioners have grown steadily during the past 5 years: The sales manager had predicted
> What effect did the smoothing constant have on the forecast for Cool-Man air conditioners? (See Problems 5-22 and 5-23.) Which smoothing constant gives the more accurate forecast? Problem 5-22: Sales of Cool-Man air conditioners have grown steadily duri
> Using smoothing constants of 0.6 and 0.9, develop forecasts for the sales of Cool-Man air conditioners (see Problem 5-22). Problem 5-22: Sales of Cool-Man air conditioners have grown steadily during the past 5 years: The sales manager had predicted, b
> A college student has just completed her junior year. The following table summarizes her grade-point average (GPA) for each of the past nine quarters: (a) Forecast the student’s GPA for the fall semester of her senior year by using a
> Ron Garcia felt good about his first week as a management trainee at Mexicana Wire Winding, Inc. He had not yet developed any technical knowledge about the manufacturing process, but he had toured the entire facility, located in the suburbs of Mexico Cit
> Southwestern University (SWU), a large state college in Stephenville, Texas, 30 miles southwest of the Dallas/Fort Worth metroplex, enrolls close to 20,000 students. The school is the dominant force in the small city, with more students during fall and s
> 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 venture’s enterprise value. B. If the venture has $2,000,0
> 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?
> 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 WACC returns keeps the debt and equity investors happy.
> 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 expected to be $3 million. The common stock of BioSystems,
> 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 pre-money and post-money valuations?
> 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.
> If the new offering price was $.80 for 1,500 shares. Assume other things remain the same.
> 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 expected to grow at a 7 percent annual rate per year int
> 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 percent.
> Describe how the enterprise valuation cash flow is determined. That is, identify the components included in determining the enterprise valuation cash flow.
> What is the enterprise (entity) method of valuation and how does it differ from the equity methods?
> What are the “factors” that influence the values of American-style options?
> How do (a) American-style options, (b) European-style options, and (c) Bermudan-style options differ?
> What is common stock or common equity? What is the purpose of preemptive rights?
> Why is credit card financing attractive to entrepreneurs? What are the risks?
> Why are new ventures at a disadvantage in receiving debt financing?
> What are the five C’s of Credit Analysis?
> What is a direct public offering?
> What is venture leasing? How does it differ from traditional leasing?
> Describe how a firm’s net working capital (NWC) is measured and how the NWC-to-total- assets ratio is calculated. What does this ratio measure?
> What is meant by the terms business crowdsourcing and crowdfunding?
> What are factoring and receivables lending?
> What is a debt guarantee and how does the SBA back a small business loan?
> What types of advisory services are available from the SBA?
> What is a Small Business Investment Company (SBIC)?
> What is the Small Business Administration (SBA), when was it organized, and what was its purpose?
> What is meant by the terms (a) capital call (b) deal flow (c) venture investing due diligence?
> What are the components or stages in the professional venture investing cycle after funds have been raised until closure?
> What are the components or stages in the professional venture investing cycle from inception to funding?
> What has happened to professional venture investing since the mid-1990s?
> How is the current ratio calculated and what does it measure? How does the quick ratio differ from the current ratio?
> Describe the development of professional venture investing in the 1960s, 1970s, and early 1980s.
> What was the early role of the Small Business Administration (SBA) in fostering venture investing?
> Is the compensation paid to venture capitalists (e.g. 2% management fee and 20% carried interest) reasonable? What are a fund’s investors buying with this compensation?
> Why should entrepreneurs care what pressures venture capitalists face in carrying out their professional money management (intermediation) function?
> What is meant by the terms (a) lead investor (b) SLOR (c) term sheet?
> What is a professional venture capitalist? How does this occupation differ from that of an angel investor?
> What are the common ways to estimate a terminal value for a venture?
> How would one expect P/E ratios to vary with a venture’s risk and growth opportunities?
> How is multiplying a projected earnings by a P/E ratio similar to discounting a perpetuity of earnings starting at that level?
> What is staged financing? Describe how the capitalization (cap) rate is calculated.
> What are the meanings of the terms “cash build” and “cash burn”? How do we calculate net cash burn rates?
> What is meant by pre-money valuation? What is post-money valuation?
> Describe the process for estimating the percentage of equity ownership that must be given up by the founder when a new equity investment is needed.
> Describe the basic venture capital (VC) method for estimating a venture’s value.
> What is the difference between discounting expected cash flows from multiple scenarios at a constant rate and averaging the scenarios’ PVs calculated with that single discount rate?
> What is meant by the utopia discount process? Describe how expected present value is calculated.
> What is meant by “finding the value of a venture’s assets is the same as finding the value of a venture’s debt plus equity”?
> Describe the equity valuation method.
> Explain the difference between pre-money valuation and post-money valuation.
> What is a venture’s reversion value?
> What are the three types of comparisons that can be made when conducting ratio analyses?
> Define the terms (a) explicit forecast period (b) terminal or horizon value as they relate to a venture’s discounted cash flow valuation.
> Describe what is meant by the statement “If you’re not using estimates, it’s not a valuation.”
> What is the relationship between equity valuation cash flows and dividends?
> Identify and describe the major components that are used to calculate the equity valuation cash flow.
> What is net operating working capital?
> Briefly describe the process for projecting financial statements.
> Define required cash and surplus cash. Why does it matter how we treat surplus cash for valuation purposes?
> What is meant by sweat equity?
> Explain how projected economic scenarios can be used to help forecast a firm’s sales growth rate.
> List the major sources of funds typically available to ventures that have successfully entered into their rapid-growth life cycle stage.
> What are financial ratios and why are they useful?
> Identify some of the types of securities that are “exempt” from registration with the SEC.
> Why does it matter if an investment is, or is not, viewed as being a security?
> What is meant by the term “blue sky” laws and how do these laws apply when issuing securities?
> Briefly describe the types of exemptions from registration of securities covered under Rules 701 and 1001.
> Briefly describe Rule 508 of Reg D.
> Briefly describe the purpose of Rule 144 of Reg D.
> What is a restricted security? Why does this designation matter? What types of buyers must the owner of restricted securities find?
> What is integration as it applies to securities offerings and why does it matter?
> What are the four conditions of a Reg D offering that are covered under Rule 502?
> Briefly discuss the Investment Company Act of 1940 and Investment Advisers Act of 1940.
> How do private and public financial markets differ?
> Briefly describe how the SEC’s Regulation D expanded the original Securities Act of 1933 definition of an “accredited investor.”
> What is the purpose of the SEC’s Regulation D?
> Identify and briefly describe two basic types of transactions that are exempt from registration with the SEC.
> Briefly describe what is meant by an intrastate offering. What are the major difficulties in assuring that an offer is intrastate?
> Briefly define the Securities Act of 1933 and Securities Exchange Act of 1934.
> What is a bond rating?
> What is meant by a prime rate?
> Define the term default risk premium.
> Define inflation. What is meant by an inflation premium?
> The SoftTec Products Company is a successful small, rapidly growing, closely held corporation. The equity owners are considering selling the firm to an outside buyer and want to estimate the value of the firm. Following is last year’s income statement (2
> Interact Systems, Inc. has developed software tools that help hotel chains solve application integration problems. Interact’s Application Integration Server (AIS) provides a two-way interface between central reservations systems (CRS) and property manage
> R.K. Maroon is a seed-stage web-oriented entertainment company with important intellectual property. RKM’s founders, all technology experts in the relevant area, are anticipating a quick leap to dot-com fortune and believe that their unique intellectual
> The Pharma Biotech Corporation spent several years working on developing a DHA product that can be used to provide a “fatty acid” supplement to a whole variety of food products. DHA stands for docsahexaenoic acid, an omega-3 fatty acid found naturally i
> What is a nominal interest rate? Describe a risk-free interest rate and a real rate of interest.
> Identify the types of financing typically used during each life cycle stage of the successful entrepreneurial venture.
> The Pharma Biotech Corporation spent several years working on developing a DHA product that can be used to provide a “fatty acid” supplement to a whole variety of food products. DHA stands for docsahexaenoic acid, an omega-3 fatty acid found naturally i
> The Pharma Biotech Corporation spent several years working on developing a DHA product that can be used to provide a “fatty acid” supplement to a whole variety of food products. DHA stands for docsahexaenoic acid, an omega-3 fatty acid found naturally i
> The Alpha One Software Corporation was organized to develop software products that would provide Internet-based firms with information about their customers. As a result of initial success, the venture’s premier product allows firms with subscriber base
> Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year (2014) of operation reached $1.3 million. Sales increased by 15 percent in 2015 and another 20 percent in 2016. However, profits after inc
> Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year (2014) of operation reached $1.3 million. Sales increased by 15 percent in 2015 and another 20 percent in 2016. However, profits after inc
