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2 years ago

FIN 516 WEEK 4 HOMEWORK

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FIN 516 WEEK 4 HOMEWORK

FIN 516 Week 4 Homework

Problem 23-3 on Implied Price of Funding based on Chapter 23

        Starware Software was founded last year to develop software for gaming applications. Initially, the founder invested $800,000 and received 8 million shares of stock. Starware now needs to raise a second round of capital, and it has identified an interested venture capitalist. This venture capitalist will invest $1 million and wants to own 20% of the company after the investment is completed.

          a. How many shares must the venture capitalist receive to end up with 20% of the company? What is the implied price per share of this funding round?

         b. What will the value of the whole firm be after this investment (the post–money valuation)?

Problem 23-4 on IRR of Venture Capital based on Chapter 23

(Excel file included)

Suppose venture capital firm GSB partners raised $100 million of committed capital. Each year over the 10-year life of the fund, 2% of this committed capital will be used to pay GSB’s management fee.

         As is typical in the venture capital industry, GSB will only invest $80 million (committed capital less lifetime management fees). At the end of 10 years, the investments made by the fund are worth $400 million. GSB also charges 20% carried interest on the profits of the fund (net of management fees).

       a. Assuming the $80 million in invested capital is invested immediately and all proceeds were received at the end of 10 years, what is the IRR of the investments GSB partners made? That is, compute IRR ignoring all management fees.

        b. Of course, as an investor or limited partner, you are more interested in your own IRR, that is, the IRR including all fees paid. Assuming that investors gave GSB partners the full $100 million up front, what is the IRR for GSB’s limited partners (that is, the IRR net of all fees paid)?

Problem 23-13 on IPO based on Chapter 23

         Your firm has 10 million shares outstanding, and you are about to issue 5 million new shares in an IPO. The IPO price has been set at $20 per share, and the underwriting spread is 7%. The IPO is a big success with investors, and the share price rises to $50 on the first day of trading.

a. How much did your firm raise from the IPO?

b. What is the market value of the firm after the IPO?

         c. Assume that the post–IPO value of your firm is its fair market value. Suppose your firm could have issued shares directly to investors at their fair market values in a perfect market with no underwriting spread and no underpricing. What would the share price have been in this case, if you raise the same amount as in part (a)?

 

d. Comparing part (b) and part (c), what is the total cost to the firm’s original investors due to market imperfections from the IPO?

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2 years ago

MKT 500 Week 1 to Week 11 Complete Course

2 years ago

Acc 557 Week 6 Homework and Quiz

2 years ago

BUS642 Business Discussion Question

2 years ago

MGMT310 Quiz 1

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MGMT310 Quiz 1

 

Question 1 of 25

4.0 Points

Managers are responsible for getting activities completed efficiently and achieving the firm’s goals by utilizing:

 

 

A. Human, financial, and material resources 

 

 

B.Information, human, and service resources

 

C.Human resources, organizational competitiveness, and organizational goals

 

D. Financial resources, top management, and organizational goals

 

 

Question 2 of 25

4.0 Points

A difference between management and leadership can be defined in the following way

 

 

A. management is human capital, and leadership is directing staff 

 

 

B. management is getting things done, and leadership is deciding what needs to be done

 

C. management is getting things done, and leadership is inspiring action taken by others

 

D. management is a position of authority or power, and leadership is inspiring action taken by others

 

 

 

 

Question 3 of 25

4.0 Points

Three different types of planning used in the function of management are

 

2 years ago

Assignment 1: LASA 2: Supply and Demand in a Global Market

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Assignment 1: LASA 2: Supply and Demand in a Global Market

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2 years ago

MKT 571 Week 1 Quiz

MKT 571 Week 1 Quiz

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 Total 18 Questions with correct Solutions

 

1. Costco is able to keep its inventory expenditure relatively low through its management technology and cutting-edge point-of-sale inventory management technology. As a result, Costco is able to pass these savings on to consumers in the form of low prices. This strategy is best described as 

·        

Differentiation

·        

market development 

·        

integrative growth

·        

overall cost leadership 

 

2. The Soccer World Cup is promoted aggressively to both companies and fans. This is an example of marketing a(n)

·        

event

·        

place

·        

service

·        

idea

 

3. Which strategy does this exemplify? Kayak and Orbitz provide their customers with a variety of travel options including flight reservations, vacation packages, flight and hotel options with or without car rentals, and cruise offerings. 

·        

Differentiation

·        

Diversification

·        

Promotional 

·        

Focus

 

 

·        

of steady supply of loanable funds in the economy during recession

·        

consumer borrowing increases during recession

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2 years ago

BUS 644 Week 2 Assignment Memorial Hospital

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BUS 644 Week 2 Assignment Memorial Hospital

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2 years ago

BUS644: Operations Management Week 1

 

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BUS644: Operations Management Week 1

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2 years ago

BUS644: Operations Management Week 3 Assignment 1

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BUS644: Operations Management Week 3 Assignment 1

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