Financial Ratios and Venture Investor Attractiveness

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WEEK 1 HOMEWORK | Entrepreneurial Finance | Professor: Caryl Pedersen | | Roxanne Robinson | 5/12/2013 | Chapter 1: Exercises/Problem #1 pp.33-34 1. [Financing Concepts] The following ventures are at different stages in their life cycles. Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing. A. Phil Young, founder of Pedal Pushers, has an idea for a pedal replacement for children’s bicycles. The Pedal Pusher will replace existing bicycle pedals with an easy-release stirrup to help smaller children hold their feet on the pedals. The Pedal Pusher will also glow in the dark and will provide a…show more content…
LearnRite estimates that venture investors should earn about a 40 percent average annual compound rate of return. | 2011 | 2012 | 2013 | 2014 | 2015 | Revenues ($M) | 1.0 | 9.6 | 30.1 | 67.8 | 121.4 | Year-to-Year Annual Sales Growth (%) | | 860.00 | 213.54 | 125.25 | 79.06 | Annual Compound Sales Growth (%) | | 860.00 | 1405.00 | 2160.00 | 2935.00 | C. Estimate LearnRite’s expected market share in each year based on the given data. | 2011 | 2012 | 2013 | 2014 | 2015 | Revenues ($M) | $1.0 | $9.6 | $30.1 | $67.8 | $121.4 | Expected Growth Rate (%) | 30 | 30 | 30 | 30 | 30 | Market & OP Expenses | 3.0 | 5.0 | ? | ? | ? | NPM (%) | | | 10 | 10 | 10 | Expected Market Share (%) | 10 | 74 | 1.78 | 3.09 | 4.25 | D. Estimate the firm’s net income (loss) in each of the five years. | 2011 | 2012 | 2013 | 2014 | 2015 | Revenues ($M) | $1.0 | $9.6 | $30.1 | $67.8 | $121.4 | Expected Growth Rate (%) | 30 | 30 | 30 | 30 | 30 | Market & OP Expenses | 3.0 | 5.0 | ? | ? | ? | NPM (%) | | | 10 | 10 | 10 | Expected Growth Profit ($M) | .30 | 2.88 | 9.03 | 20.34 | 36.42 | Loss | (2.70) | (2.12) | 3.01 | 6.78 | 12.14 | E. Estimate the firm’s ROA beginning when the net or after-tax income is expected to be positive. | 2013 | 2014 | 2015 | ROA ($M) |

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