7. AppCo is an early stage company whose financial plans call for the company to be...

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Finance

7. AppCo is an early stage company whose financial plans callfor the company to be sold in 4 years, at a valuation of $50million. You are considering an investment of $100,000 in AppCo;you like the company but feel that it is a somewhat risky venture,so you want a 35% annual return on your investment. [Hint: refer toQuestion 1 for guidance]
a. What % of the company would you expect to receive for your$100,000?
b. If there are 1,000,000 shares of StartCo already outstanding,out of 50 million shares authorized, how many shares will you bepurchasing, and at what price?

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4.2 Ratings (735 Votes)

7 a Value of AppCo after 4 years V4 50 million 50 x 1000000 50000000 Discount rate Annual return r 35 Let V0 be the current value of the company V0 Discounted value of V4 discounted See Answer

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7. AppCo is an early stage company whose financial plans callfor the company to be sold in 4 years, at a valuation of $50million. You are considering an investment of $100,000 in AppCo;you like the company but feel that it is a somewhat risky venture,so you want a 35% annual return on your investment. [Hint: refer toQuestion 1 for guidance]a. What % of the company would you expect to receive for your$100,000?b. If there are 1,000,000 shares of StartCo already outstanding,out of 50 million shares authorized, how many shares will you bepurchasing, and at what price?