Year 2009 2010 2011 2012 P 2013 P 2014 P 2015 P 2016 P 2017 P Formulas

Revenue $ 9.00 $ 22.00 $ 63.00 $ 137.00 $ 198.00 $ 260.00 $ 335.00 $ 425.00 $ 525.00 NI = Capital Expenditure +Increase in Net Working Capital - Dereciation
Year-on-year Growth 144% 186% 117% 45% 31% 29% 27% 24% IR = NI / Net Income Beta 1.50
COGS $ 4.20 $ 10.90 $ 37.20 $ 82.40 $ 117.10 $ 153.40 $ 194.30 $ 242.30 $ 290.00 GV = CFs+1 / (r- Year-on-year Growth) Treasury Rate 0.05
Gross Profit $ 4.80 $ 11.10 $ 25.80 $ 54.60 $ 80.90 $ 106.60 $ 170.70 $ 182.70 $ 235.00 CFs+1 = Free Cash Flw * (1+ Year-on-Year Growth)/(r-year-on-year growth) Market Risk Premium 0.06
Operating Expense $ 279.00 $ 4.32 $ 8.50 $ 15.76 $ 20.78 $ 29.90 $ 41.85 $ 57.35 $ 77.15 NPV of firm at exit = (CF1/(1+R)+ (CF2/(1+R)^2) + ….+ (CFn/(1+R)^n + ….+ ((CFs + GV)/(1+R)^s-t) r 0.093
EBITDA $ 2.01 $ 6.78 $ 17.30 $ 38.84 $ 60.12 $ 76.70 $ 98.85 $ 125.35 $ 157.85 CFs+1 -712.452
Deprciation and Amortization $ 0.05 $ 0.11 $ 0.32 $ 0.69 $ 0.99 $ 1.30 $ 1.68 $ 2.13 $ 2.63
EBIT $ 1.97 $ 6.67 $ 16.99 $ 38.16 $ 59.13 $ 75.40 $ 97.18 $ 123.23 $ 155.23
EBIT Margin 22% 30% 27% 28% 30% 29% 29% 9% 30%
Interest expense $ - $ - $ - $ - $ - $ - $ - $ - $ -
Profit before taxes $ 1.97 $ 6.67 $ 16.99 $ 38.16 $ 59.13 $ 75.40 $ 97.18 $ 123.23 $ 155.23
Taxes $ 0.59 $ 2.00 $ 5.10 $ 11.45 $ 17.74 $ 22.62 $ 29.15 $ 36.97 $ 46.57
Net Incom $ 1.38 $ 4.67 $ 11.89 $ 26.71 $ 41.39 $ 52.78 $ 68.02 $ 86.26 $ 108.66
Capital Expenditure $ 1.00 $ 1.45 $ 1.90 $ 2.45 $ 3.10 $ 3.83
Increase in Net Working Capital $ 6.00 $ 8.67 $ 11.39 $ 14.67 $ 18.61 $ 22.99

Free Cash Flow $ 20.39 $ 32.26 $ 40.80 $ 52.58 $ 66.67 $ 84.46

 1. What is the value of the firm under venture capital method?
Amount Invested 2million pre money Evaluation5million ($2 million / 40%) + $5 million Post-money valuation = $7 million
Equity Stake 40% 7million value of te firm
2. What is the value of the firm under venture capital method?
NI $ 6.31 $ 9.13 $ 11.99 $ 15.44 $ 19.58 $ 24.19
IR 0.236241 0.22058468 0.227169 0.226992 0.226988 0.222621
GV 4846.61
NPV of firm at exit -211.84

3. Is Everest Partners justified in asking for 30% equity stake?

Pre Money Value $ 63.00

Investment $ 30.00
Post Money Value $ 93.00

Share % of VC 32.26%
Share % of founders 67.74%

EverestPartener is justified for asking 30% equty stake Since 30% equity stake is less than 32.26%.