09 Jul WHAT DOES THIS INDICATE THE FIRM’S EXPECTED EXIT EBITDA MULTIPLE WILL BE?
(TCO H) Your management team identifies LipLife as a business to acquire. LipLife owns the technology for a new lipstick that lasts five days and changes hues each night. The firm’s founders are out of money and want to sell their lipstick algorithm and the technologies it is based on. 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 $5 million, six-year loan at 13% 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 $2 million of its own capital. One of your friends from the MBA program is a venture capitalist. His firm agrees to invest $2 million at an expected 40% annual return for six years, at which time it expects a liquidity event in order to obtain its money and 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 six years, LipLife will have an expected exit enterprise value of $27 million, based on an expected exit EBITDA of $2.25 million. What does this indicate the firm’s expected exit EBITDA multiple will be?,(b) Given the future value calculated in (a), what will be the equity value at that time? ,(c) Because the VC firm expects a 40% compound return on its investment, what would be the dollar value 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 LipLife’s original venture capital investment? ,(e) What will be the dollar value of the management team’s original $2 million equity investment at the time of the liquidity event?
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.