Entrepreneurial Finance -Valuation Assignment
This task requires an understanding of how the PV of discreet and terminal Money Flows are mixed to estimate entity valuation—step one in negotiating for funding capital.
TecOne Corp. is about to start producing and promoting its prototype product (what stage of the life cycle?); it’s now 12 months zero and the agency initiatives future annual money flows as follows:
12 months Money Circulation
1 ($50,000)
2 ($20,000)
three $100,000
four $400,000
5 $800,000
Assume money flows after 12 months 5 keep @ $800,000. Buyers need a 40% return for a 12 months zero funding; what’s TecOne’s current worth?
Now assume 12 months 6 CF will probably be $900,000; and annual CFs are anticipated to develop thereafter at eight%. If traders nonetheless require a 40% venture return, what’s the agency’s current worth?
If the required fee of return on CFs throughout the maturity stage will drop from 40% to 20% starting in 12 months 6, what’s TecOne’s current worth? (what’s a potential clarification for this modification?)Utilizing the final current worth calculation, what % possession would the agency’s founders should
give as much as safe $three,000,000 in exterior funding at 12 months zero?
