Beyond Products

1713 words 7 pages
Question 1: Evaluate the different market opportunities available to Peter, taking the financiers’ perspective. What would be your recommendations as a business angel?
The success of the flow binding shows that people are looking for a better solution than the now available bindings. Hereby, it is clearly very important to keep the soft boots, as they provide the snowboarders the necessary comfort, together with the ease of the step-in bindings. However, attention need to be taken into account to avoid the disadvantages of the flow bindings.
As a business angel I would trust Peter on this matter, as he has been a semi-professional snowboarder. He knows the important characteristics the bindings must have in order to be the most
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Spies, loose of the technology, loose of control over the production are risks.
g. The tests are not done by a professional company, less trust in the brand.

Question 3: What realistic financial proposal would you make to Peter as a business angel?

One of the most important inputs of the “venture capital method” is the exit value. The determination of this value will lead to discussions between the investor and the entrepreneur. We assume that the investor will exit the venture after 6.5 years, at the end of 2011. We calculate the exit value in two ways, using a multiple and a DCF approach.
The DCF approach incorporates a number of assumptions. We assume a terminal growth rate for the FCFF of 3% since the business becomes mature and projected cash flows are stabilizing since 2011. We also assumed that the stable cash flows will facilitate lending which will decrease the cost of capital considerably, reaching 15%. To calculate the equity value we subtracted net debt from the company value, based on financial costs and interest rates of 8.08%. The results are presented in Table 1.

Table1 1
This result differs significantly from the one we calculated based on multiples of quoted athletics equipment companies (Table 2).
Table 2 Normally, EV/EBITDA multiple is more correct to calculate the enterprise value since it is closer to the discounted cash flow concept. However, in this particular case firstly, we are interested in equity value and the market value


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