05 Jun uestion Part 3 5. (TCO H) Your management te
uestion
Part 3 5. (TCO H) Your management team identifies a security software firm, DigiVault, that has developed a 256-bit data encryption key that is licensed by Fortune 100 companies and governments to protect sensitive database information
from prying eyes. The firm’s founders are out of money and want to sell their technology. Because you and your team don’t have enough money to acquire the firm outright on your own, you turn to outside sources of funding. A venture bank is willing to put up
a $3.5 million, five-year loan at 11% per year, which only has interest payments due during its life; the principal balance will be paid off at the liquidity event. Your team puts up $750,000 of its own capital. One of your friends from the MBA program is
a venture capitalist, and his firm agrees to invest $3.5 million at an expected 60% annual return for five years, at which time they expect a liquidity event in order to obtain their money and the return back. Include all your calculations to support each
answer in order to earn full credit. Answers must be completed in sequence. Required:
(a) Assume that in five years, DigiVault will have an expected exit enterprise value of $48 million, based on an EBITDA multiple of 5.0 from similar exit transactions. What
does this indicate the firm’s expected EBITDA will be at that time?
(b) Given the future value calculated in (a), what will be the equity value at that time?
(c) Because the VC firm expects a 60% compound return on its investment, what would be the dollarvalue of its portion of the equity value you calculated in (b)?
(d) Based on your answer in (c), what would be the amount of the equity up front that you would have to give up in order to obtain DigiVault’s original venture capital investment? (e) What will
be the dollar value of the management team’s original $750,000 equity investment at the time of the liquidity event? (Points : 50)
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.