Using the following information, please answer the questions about Surelock Homes, a start-up company. In your analysis, assume the valuation date is the end of year 6, projected earnings in year 6 will be $12 million, and an appropriate price-to-earnings ratio for valuing these earnings is 20 times.
|
FinancingRound
|
Amount in millions
|
Year
|
RequiredReturn
|
|
1
|
$ 6
|
0
|
60%
|
|
2
|
8
|
2
|
40%
|
|
3
|
12
|
4
|
30%
|
In addition, the company wants to reserve 15 percent of the shares outstanding at time 6 for employee bonuses and options.
a. What percentage ownership at time 0 should round 1 investors demand for their $6 million investment?
b. If Surelock presently has 1 million shares outstanding, how many shares should round 1 investors demand at time 0?
c. What is the implied price per share of Surelock stock at time 0?
d. What is Surelock's pre-money value at time 0? What is its post- money value?