Question

Assume as a VC that you want to establish a pre- and post-money valuation in support of the issuance of a term sheet. In order to establish a discount rate, you've decided to use CAPM with the following inputs: • Risk free rate of 4% • Market return expectation of 10% • Beta coefficient of 2.5 You are planning to invest $5mm in a lump sum based solely on the company's success-based forecast as the basis for your operating cash flow (OCF) projections as follows: Year 1: -$3mm Year 2: -$1mm Year 3: +$1mm Year 4: +3mm Year 5: +$5mm Assume 5% annual growth after year 5. At this point you perceive the most likely harvest to involve a M&A transaction. Recent transactions have occurred at the following operating cash flow multiples: Transaction A: 8x Transaction B: 10x Transaction C: 11x Transaction D: 12x The company currently has 1mm shares outstanding. Propose an implied share price, a pre-money and post-valuation valuation for this venture.

          Assume as a VC that you want to establish a pre- and post-money valuation in support of the
issuance of a term sheet.

In order to establish a discount rate, you've decided to use CAPM with the following inputs:
• Risk free rate of 4%
• Market return expectation of 10%
• Beta coefficient of 2.5

You are planning to invest $5mm in a lump sum based solely on the company's success-based
forecast as the basis for your operating cash flow (OCF) projections as follows:
Year 1: -$3mm
Year 2: -$1mm
Year 3: +$1mm
Year 4: +3mm
Year 5: +$5mm

Assume 5% annual growth after year 5.

At this point you perceive the most likely harvest to involve a M&A transaction. Recent
transactions have occurred at the following operating cash flow multiples:

Transaction A: 8x Transaction B: 10x Transaction C: 11x Transaction D: 12x

The company currently has 1mm shares outstanding.

Propose an implied share price, a pre-money and post-valuation valuation for this venture.

Assume as a VC that you want to establish a pre- and post-money valuation in support of the
issuance of a term sheet.

In order to establish a discount rate, you've decided to use CAPM with the following inputs:
• Risk free rate of 4%
• Market return expectation of 10%
• Beta coefficient of 2.5

You are planning to invest 5mm in a lump sum based solely on the company's success-based
forecast as the basis for your operating cash flow (OCF) projections as follows:
Year 1: -3mm
Year 2: -1mm
Year 3: +1mm
Year 4: +3mm
Year 5: +5mm

Assume 5% annual growth after year 5.

At this point you perceive the most likely harvest to involve a M A transaction. Recent
transactions have occurred at the following operating cash flow multiples:

Transaction A: 8x Transaction B: 10x Transaction C: 11x Transaction D: 12x

The company currently has 1mm shares outstanding.

Propose an implied share price, a pre-money and post-valuation valuation for this venture.

Added by Annette D.

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