Fiance Homework

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Ch. 7 Exercise #11 ABC & D

Kareem Construction Company has the following amounts of interest-bearing debt and common equity capital:

FINANCING SOURCE DOLLAR AMOUNT INTEREST RATE COST OF CAPITAL
-----------------------------------------------------------------------------------------------------------------------------------
Short-term Loan $200,000 12%
Long-term Loan $200,000 14%
Equity Capital $600,000
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B. Determine the present value of a venture at the end of Year 0 if the venture investor wants a 40 percent annual rate of return on the investment.

Ch. 11 Exercise #1

List three venture capital firms active in your region (Michigan or Tennessee) and describe their investing style and restrictions.

Ch. 12 Question #8

Compare the characteristics in terms of load amounts, lenders and SBA role in 7(a) loans versus 504 loans.

Ch. 13 Question #15

What is the enterprise (entity) method of valuation and how does it differ from the equity methods of Chapters 9 and 10?

Ch. 13 Exercise #2 A & B

The CCC (triple C) Venture has issued convertible preferred stock to its venture investors. Each share of preferred stock is convertible into .80 shares of common stock and pays an annual cash dividend of $.25.

A. If each share of preferred stock has a market value of $4, what is the minimum price that a share of the CCC Venture’s common stock should be selling for (ignore the dividend yield on the preferred stock)? B. If a share of the CCC Venture’s common stock is actually trading at $3 per share, what are the implied conversion terms? Given the above actual conversion terms, explain hose the common stock could be trading at $3 per share while the preferred stock is trading at $4 per share.

Ch. 14 Exercise #1 A, B & C

The venture investors and founders of ACE

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