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1. Which of the following correctly completes this sentence? The value
of any asset is the present value of (Points : 5) • profits it is
expected to provide. • revenue it is expected to provide • net working
capital it is expected to provide. • cash flow it is expected to
provide. • tax shields it is expected to provide
2. (TCO A) Which is the correct chronology of events in the life
cycle of a business venture? (Points : 5) • prepare initial financial
statements, manage ongoing operations, sell or merge • project cash
needs, obtain startup financing, go public • obtain additional financing
(such as IPO), obtain seasoned financing, choose organizational form •
project cash needs, examine
exit opportunities, obtain seasoned financing
3. (TCO A) During the survival stage of a venture’s life cycle, the
primary source(s) of funds are (Points : 5) • investment bankers,
business angles, and business operations. • business angles, venture
capitalists,
business operations, and entrepreneur’s assets. •
business operations, government assistance, suppliers and customers, and
venture capitalists. • commercial banks, investment bankers, business
operations, and suppliers. • None of the above
4. Net cash burn
is equal to which of the following? (Points :
5) • Cash flow from operations + cash flow from financing – ending cash
balance • Net sales – increase in current assets • Cash flow from
operations + cash flow from investments – cash flow from investing •
Cash
burn – ending cash balance + cash build • Cash burn – cash build
Question 5. 5. (TCO G) Growing ventures seeking venture capital
funding via investment vehicles authorized by the U.S. Government’s
Small Business Administration would turn to which of the following?
(Points : 5) • The 7(a) program • The 504 program • A Community Development Financial Institution (CDFI) • A private SBIC
Question 6. 6. (TCO F) HausBier Brewery licenses beer-brewing
technology that produces 300% of the amount of beer from the same amount
of
hops as standard processes. This promising technology is intoxicating
to investors who seek to buy the firm’s stock in its first
capital-raising campaign. If HausBier Brewery had an enterprise value of
$10 million before investors make a $4 million investment
(expecting
a 50% return), what will the firm’s post-money valuation be? (Points :
5) • $16 million • $6 million • $12 million • $22.5 million • $14
million
7. (TCO B) Which of the following entities is liable for a corporation’s debts? (Points : 5) • Stockholders
• Board of directors • The corporation itself • The corporation’s president • The firm’s founding investors
Question 8. 8. (TCO B) Which form of business organization is
characterized as having unlimited life? (Points : 5) • Proprietorship •
Limited partnership • Limited liability corporation • Subchapter S
corporation • General partnership
1. (TCO H) Describe an initial public offering (IPO). What are the
differences between a primary offering and a secondary offering? (Points
: 20)
2. (TCO F) What are some of the reasons that entrepreneurs may not
actually obtain debt financing, though they might very much need it?
(Points : 20)
3. (TCO F) Healthy Optiplex (HO) has a new neutraceutical process
technology patent that it licenses to major manufacturers. The firm is
privately held and there is no public market for its common stock. HO’s
2012 EBIT was $2.2 million. The firm’s year-end 2012 accumulated
depreciation balance was $2.4 million; at the end of 2011, the
accumulated depreciation balance was $1.8 million. At the end of 2012,
Healthy
Optiplex had total liabilities of $4.45 million, which included a $3
million loan balance, and the firm’s total shareholders’ equity balance
was $2.55 million. The CEO has asked you to determine the value of HO’s
equity. Your research reveals that BodyVision is a public company that
develops similar solutions for the same markets. Bodyvision’s current
share price is $28 and the firm has 750,000 shares outstanding.
BodyVision also has $9 million in bonds outstanding, and its current
EBITDA is $3.75 million.
Make sure to provide all calculations in your answers to each of the following questions:
Required: (a) Calculate BodyVision’s enterprise value and its
EBITDA multiple. (b) Calculate Healthy Optiplex’s EBITDA. (c) After
completing (a) and (b) above, use BodyVision’s EBITDA multiple to
determine Healthy Optiplex’s implied Enterprise Value and its estimated
equity value. (Points : 30)