Telmerate Case

To equal $6,697.44, the stock price must increase to at least $37.23[2] at the end of the 5th year. The stock price has to be higher than $35 in order to be exercised and make a gain, otherwise she will leave it expire worthlessly. However, from Exhibit 2, Telstar stock price has

The third scenario was ignoring the option to invest in the second-generation project and selling the equipment in year 2. We evaluated this option as a put option. First, we calculated the probabilities for going up and down based on the assumption of a risk neutral word. As a result, the probability of going upward is calculated as 0.3375 and downward probability is 0.6625. In order to determine the present value of all the sequence cash flow at the end of year 2, we calculated the upside change rate and downside change rate as 64.87% and -39.35%, respectfully. The next step is to analyze the option value by using the “Binomial Tree” method. In order to determine the present value of all the subsequence cash flow at the end of year 2, we calculated the cash flow at each node on the tree, until 2006. We discounted all the cash flow at the risk free rate at 10%. The End of Year NPV of all the subsequence cash flow at Year 2 is calculated as $7,571,752, and the selling price of the equipment at end of 2 is $4,000,000, which is the salvage value. We found the NPV of selling the machine at end of Year 2 to be -$2,951,861 as of Year 0, which is negative. The APV of the project after adding the option turned out to be -$6,321,932. This negative APV suggest that the

Finance. In order to finance our startup year, we issued stocks and borrowed loan to finance our operation and for safety in case the sales did not go well. Financing using stocks means that we are selling common or preferred stocks to individuals. In return for the money, they get some ownership over the company and its interest. This helps to bring public’s awareness about the company. If the sales suffice, we will pay the debt in the second round.

However, significant risks are prevalent in acquiring PTI. First, more one-third of PTI’s sales originated from five companies and it is uncertain that without Harry Elson’s personal efforts if their patronage will continue. Secondly, the bank valuation of PTI ($600K) appears inflated as the bank’s valuation is notably more than PTI’s book value ($292K), calculated with an inflated price/earnings multiple for a company with no proprietary

1. Ignoring taxation and other constraints, Ms. Jameson is better off taking the options. The stock currently trading at $18.75 and the exercise price is $35. This may seem drastically far away. However, 5 year T-Bill rates are currently at 6.02%. Combined with a current stock volatility of approximately 42%, this allows each option to be valued at approximately $4.93.

According to my analysis of the Accessline’s proposed term sheet, I do not believe that Apex would serve its own interests, or those of its investing partners, by investing in Accessline according to the terms proposed. By investing at the proposed valuation, according to the proposed control and incentive structure, Apex would be shouldering a disproportionate share of the risk should Accessline fail to meet its performance targets, or require fresh inflows of capital from future investment rounds. Nor can Accessline take the sort of steps necessary to protect its investment in the case of management failure.

One of the major risks facing Telco is their CEO is 70 years old and his son being the CTO could give rise to a conflict of interest. Bryant Dunetz had agreed to step down and allow Valhalla to search for a new CEO. This could be a risky endeavor because Dunetz may either refuse to step down after negotiations or the new CEO may not be a good fit. The other two major risk factors is they do not have a strong executive management team and their competition in this market space is ramping up and soon they will not be the top solutions provider for large corporate telecom equipment and services. With Valhalla having only 25% of the voting rights in the company after the capital issue, they may not have the ability to force their way with the future management. Meanwhile the average time of determining success of a venture capital investment is 18 months. Replacing the entire management team and vetting that process out would take up a significant chunk of that time. Lastly, Valhalla does have to move quickly to get Telco the capital they need to gain as much market share as quickly as possible. The

Apex Investment Partners was founded in 1987 by James A. Johnson and the First Analysis Corporation. In its eight-year life, the VC had raised three funds. The two first which are already closed had, together, a committed capital of around $70M. There were mainly concentrated in four areas: • • • • Telecommunication, information technology and software. Environmental and industrial productivity-related technologies. Consumer products and specialty retail. Health-care and related technologies.

Their marketing is already very successful and creating this growth opportunity would only require a few changes. Investing in their already existent Symphony model will allow NBCUniversal to stay ahead of their competitors who are beginning to mimic their marketing strategies. What sets the company apart from the pact is the fact that NBCUniversal has the unique opportunity to utilize Comcast’s

The venture leasing deal that Aberlyn proposed to RhoMed is an innovative way for RhoMed, a start-up firm, to acquire financing without diluting its equity value and raising debt in the market. Management believes that the firm is more valuable than venture capital firms would believe, and debt financing would be extremely costly since RhoMed doesn’t currently have positive cash flow. For Aberlyn, the main benefits of the transaction are the interest payments paid on the lease and potential to sell the patent for a much higher value than the original $1 Million valuation by RhoMed. However, this is a rather risky investment for Aberlyn. If RhoMed defaults on its payments, Aberlyn uses the patent as collateral and

performance and quality products. The $3 million investment can be spent on creating this entity and

Currently HVC has two investment opportunities: (1) Security Systems, a firm that needs additional capital to develop an Internet security software package, and (2) Market Analysis, a market research company that needs additional capital to develop a software package for conducting customer satisfaction surveys. In exchange for Security Systems stock, the firm has asked HVC to provide $600,000 in year 1, $600,000 in year 2, and $250,000 in year 3 over the coming three-year period. In exchange for their stock, Market Analysis has asked HVC to provide $500,000 in year 1, $350,000 in year 2, and $400,000 in year 3 over the same three-year period. HVC believes that both investment opportunities are worth pursuing. However, because of other investments, they are willing to commit at most

The VC firms should then go ahead to make clever investments so they can give the limited partners their cash back… in addition to a benefit.

Capital Introduction Programs are one of the strategic advantages that our third party service providers will bring. These service providers have the channels to promote the fund to new investors. This service is uncompensated as they will benefit from the symbiotic relationship with the “Investment Company”.

Choosing the right sources of capital is a decision that will influence a company for a very long time. In 1996, the Hutchison Whampoa company is in dire need of considerable funds in order to finance their long term projects. In fact, investment analysts estimated that the company would require a minimum of US$500 million of new capital in the coming year and would face large ongoing capital needs if the firm was to remain on the growth trajectory established in recent years (Hutchison Whampoa Limited: The Capital Structure Decision, 1999).