Caleb Clark Ventures invests $4 million in convertible preferred stock in a company with an $12 million pre-money valuation. The term sheet shows the investment is non- participating with 1x liquidation preference. a) What is the ownership percentage of the VC after the investment?
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- Suppose IWT has decided to distribute $50 million, which it presently is holding in liquid short-term investments. IWT’s value of operations is estimated to be about $1,937.5 million; it has $387.5 million in debt and zero preferred stock. As mentioned previously, IWT has 100 million shares of stock outstanding. Assume that IWT has not yet made the distribution. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Now suppose that IWT has just made the $50 million distribution in the form of dividends. What is IWT’s intrinsic value of equity? What is its intrinsic stock price per share? Suppose instead that IWT has just made the $50 million distribution in the form of a stock repurchase. Now what is IWT’s intrinsic value of equity? How many shares did IWT repurchase? How many shares remained outstanding after the repurchase? What is its intrinsic stock price per share after the repurchase?Caleb Clark Ventures invests $2 million in convertible preferred stock in a company with an $8 million pre-money valuation. The term sheet shows the investment is non-participating with 1x liquidation preference. A) Assume the preferred stock is participating. At an exit value of $15,000,000, what is the payoff to the common stockholders (i.e. Founders & Management)? B) If the VC owned non-participating convertible preferred stock with a 2x liquidation preference at what exit value is the VC indifferent between either converting or not converting?Caleb Clark Ventures invests $2 million in convertible preferred stock in a company with an $8 million pre-money valuation. The term sheet shows the investment is non-participating with 1x liquidation preference. Answer the following: A) What is the ownership percentage of the VC after the investment? 20% B) At what exit value is the VC indifferent between either converting or not converting? C) Assume the preferred stock is participating. At an exit value of $15,000,000, what is the payoff to the VC? D) Assume the preferred stock is participating. At an exit value of $15,000,000, what is the payoff to the common stockholders (i.e. Founders & Management)? E) If the VC owned non-participating convertible preferred stock with a 2x liquidation preference at what exit value is the VC indifferent between either converting or not converting?
- In October 2018, TLT Bhd decided to invest its idle cash in the shares of SGS Bhd. Therefore, on 1 November 2018, TLT purchased 200,000 shares of SGS at RM2.50 per share. The investment was measured at fair value through profit or loss. On the same date, TLT purchased put option on 200,000 shares of SGS at a premium of RM0.06 per share. The put option had an exercise price of RM2.50. The expiry date was 30 April 2019. The prices of the shares of STS and the put option were as follows: Date Price per unit of share Time value per unit of put option 30 November 2018 RM2.35 RM0.04 31 December 2018 RM2.40 RM0.03 REQUIRED: Prepare the journal entries on 1 November 2018, 30 November 2018 and 31 December 2018 with regard to the investment in shares of SGS and the purchase of put option in accordance with the fair value method.Four years ago, Quantum Computer Services issued convertible preferred stock with a par value of $60 and a stated dividend of 5 percent. Each share of preferred stock can be converted to three shares of common stock at the option of the investor. When issued, the preferred stock was sold at par value such that Quantum raised $3.6 million to fund expansion for its operations. What is the conversion price of the preferred stock? When should an investor consider converting into common stock? (Ignore taxes and other costs that might be associated with conversion).On October 17, 2021, LILAC Corporation exchanged 20,000 shares of its ₱200 par value stock for land. A few months ago, the land was appraised by an independent appraiser at ₱5,000,000. The land had an initial cost of ₱4,500,000. LILAC is currently trading at the stock exchange at ₱300. How much should be credited to Share Premium upon the issuance of the shares? Choose answer, either a or b. Show solution in good accounting form. a.) ₱ - 0 - b. ) ₱ 2,000,000
- Assume that EBV invested in Newco at the terms in Exercise 10.2, and it is now one year later. Talltree is considering a $10M Series B investment in Newco. Talltree proposes to structure the investment as 8M shares of convertible preferred stock. The employees of Newco have claims on 10M shares of common stock, and the previous venture investors (EBV) hold 6M shares of Series A convertible preferred. Thus, following the Series B investment, Newco will have 10M common shares outstanding, and would have 24M shares outstanding on conversion of the CP. Talltree estimates a 40 percent probability for a successful exit, with an expected exit time in 4 years and an exit valuation of $500M. The $250M Talltree fund has annual fees of 2 percent for each of its 10 years of life and earns 20 percent carried interest on all profits. 10.2 EBV invested in Newco Initial Investment by EBV 5.00 Expected Value of EBV's Stake 46.88 Annual Return 56.46%Which one of the following share issues would be classified as a liability?a) An issue of 10,000 irredeemable preference shares with a coupon rate of5% per annum. The dividend is mandatory and if it is unpaid at the end ofthe period then it becomes cumulative in the following period b) An issue of 50,000 ordinary shares c) An issue of 20,000 shares which are redeemable only at the option of thepreference shareholder. A dividend is payable on these shares at thesame amount per share as any ordinary dividend declared in the year andis not mandatory d) A buyback of £100,000 of a company's own ordinary share capital What is the correct option?An investor purchased a Convertible Note of Company XYZ for $500,000 with a $5 million valuation cap. The Convertible Note is protected against dilution from the creation of a future employee stock option pool. Company XYZ later raises $5 million in a Series A round of financing at a $20 million post-money valuation. The Series A financing terms include a provision that the company must create a stock option pool that will equal 5% of the company’s fully diluted shares after giving effect to the sale of the Series A Preferred. Company XYZ currently has 4 million shares of common stock outstanding. a) What will be the capitalization table of the Company XYZ after the Series A financing round?
- Yale Corporation has a value of operations equal to P2,100, short-term investments of P100, debt of P200, and 100 shares of stock. QUESTIONS:a. What is Yale's estimated intrinsic stock price? b. If Yale's converts its short-term investments to cash and pays a total of P100 in dividends, what is the resulting estimated intrinsic stock price? c. If Yale converts its short-term investments to cash and repurchases P100 of its stock, what is the resulting estimated intrinsic stock price and how many shares remain outstanding?Howe Corporation plans to issue 7,400 shares of its $1 par value common stock for $34 per share and 800 shares of its $30 par value preferred stock for $33 per share. What would Howe’s legal capital be? What would be the amount of capital received in excess of the par value of common and preferred stock? Why is a distinction made between legal capital and total capital?Rally inc, is an all equity firm with assets worth $25B and 10B shares outstanding. Rally plans to borrow $10B and use funds to repurchase shares. Rally’s corporate tax rate is 35% and Rally plans to keep its outstanding debt equal to $10B permanently. Suppose Rally offers $3 per share, and shareholders tender their shares at this price. What will be Rally’s share price after the repurchase?
