BU121 Lecture Notes - Lecture 12: Preferred Stock, Gie, Cash Flow
Document Summary
Maturity/growth: cash inflows are higher than outflows, time to pay back borrowings, first-round financing: money to maintain financing, comes from business financing, venture capitalists, government assistance programs, and commercial banks, second-round financing, mezzanine financing, liquidity stage financing. Decline stages: growth slows, most value is realized, consider exit. Based on assumptions that value of business = sum of the present values of any expected future benefits income stream and/or liquidity event: market approach. Value is determined based on comparisons to similar companies for which values are known. Value determined as measure of net cost of assets, original amount invested or (cid:862)(cid:272)ost-to-dupli(cid:272)ate(cid:863) Discounted cash flow: determine free cash flows. Free cash flows = operating cash flow capital expenditures. + potential liquidity event: discount for risk and time value of money. Investors will use a relatively high discount rate for risk involved. Market studies, testing prototypes, limited manufacturing 40-60% Viable product and established market 35-50: risk adjusted net present value.
