You started Max Inc., a seed stage web-oriented entertainment venture, with 10,000 shares. You do not expect to make a profit until year 4 when your net income is expected to be $4 million. An investor wants to invest $1.5 million in your venture. You and the investor agree that the required return on this investment is 40% and that the investor will exit at the end of year 4. Meanwhile, the common stock of TDC, a comparable firm, currently trades in the over the counter market at $10 per share. TDC’s net income for the most recent year was $300,000 and the firm has 150,000 shares of common stock outstanding. However, two years after this deal, it turns out that the venture needs an additional investment of $1 million. Another investor is willing to invest $1 million in your venture provided you give her 30% return. Calculate the percentage of ownership dilution suffered by the first-round investor after the second investment.
|
22. |
FV investment1 = 1500000*1.4^4 =5,762,400.00 |
|||
|
FV Venture = 5x$4M = $20M |
||||
|
% Investor 1 = 5,762,400.00/20M = 28.81% |
||||
|
% Founder = 1-28.81% = 71.19% |
||||
|
Total shares = 10,000/71.19% = 14,046.92 |
||||
|
Shares issued = 14,046.92– 10,000 = 4,046.92 |
||||
|
Second Round |
||||
|
% Investor 2 = (1000000*1.30^2)/20M = 8.45% |
8.45% |
|||
|
% Founder and 1st Investor = 1-8.45% = 91.55% |
||||
|
Total shares = 14,046.92/91.45%= 15.343.44 |
15343.44 |
|||
|
% Investor 1 = 4,046.92/15,236.92= 26.38% |
26.38% |
|||
|
%Dilution =(28.81%-26.38%)/28.81% = 8.45% |
8.45% |
In: Finance
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Hide Folder Information |
|
| Instructions | |
|
You are the Chief Financial Officer for Bio Innovations, a private company operating since 1993. Bio develops and markets cancer drugs, and recently became a cloud provider for medical centers. You recently joined the company and have been encouraging the founder and executive chair, Mary Cooper, to take the company public. Mary is reluctant to do that primarily because of the nature of the business and her belief that GAAP financial statements place the company in an unfavorable position, especially against the background of its significant research and development expenditure that is expected to continue for the foreseeable future. Mary met an investment banker during her recent family vacation and immediately called you into her office on her return to tell you of the interaction with the banker who mentioned something to her about non-GAAP reporting. Mary is unsure of what he meant by non-GAAP reporting and how such reporting would create a favorable position for Bio, were it to go public. She is also fearful that she would face penalties if a publicly listed Bio engaged in what seems like a dubious reporting practice. Mary reluctantly asks for your advice as the investment banker is encouraging her to take the company public and wants to make a formal presentation to Bio’s board on going public You are excited to hear about this development as the main reason you joined the company is that you felt it was an excellent candidate for a listing on the New York Stock Exchange. Further, your involvement would be a major career achievement.
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In: Accounting
Problem 23-04
Sarasota Company had the following information available at the end of 2020.
|
SARASOTACOMPANY |
||||||
|
2020 |
2019 |
|||||
| Cash |
$9,950 |
$4,010 |
||||
| Accounts receivable |
20,550 |
12,960 |
||||
| Short-term investments |
21,830 |
29,800 |
||||
| Inventory |
42,340 |
35,030 |
||||
| Prepaid rent |
2,990 |
12,090 |
||||
| Prepaid insurance |
2,090 |
91 |
||||
| Supplies |
990 |
75 |
||||
| Land |
124,970 |
174,030 |
||||
| Buildings |
353,000 |
353,000 |
||||
| Accumulated depreciation—buildings |
(104,980 |
) |
(86,810 |
) |
||
| Equipment |
522,130 |
396,610 |
||||
| Accumulated depreciation—equipment |
(128,890 |
) |
(111,580 |
) |
||
| Patents |
44,790 |
49,520 |
||||
| Total assets |
$911,760 |
$868,826 |
||||
| Accounts payable |
$21,970 |
$31,740 |
||||
| Income taxes payable |
5,030 |
3,980 |
||||
| Salaries and wages payable |
4,980 |
3,020 |
||||
| Short-term notes payable |
10,080 |
10,080 |
||||
| Long-term notes payable |
60,150 |
70,050 |
||||
| Bonds payable |
396,540 |
396,540 |
||||
| Premium on bonds payable |
23,170 |
27,926 |
||||
| Common stock |
241,390 |
218,640 |
||||
| Paid-in capital in excess of par—common stock |
25,100 |
17,500 |
||||
| Retained earnings |
123,350 |
89,350 |
||||
| Total liabilities and stockholders’ equity |
$911,760 |
$868,826 |
||||
|
SARASOTA COMPANY |
||||||
| Sales revenue |
$1,170,900 |
|||||
| Cost of goods sold |
752,630 |
|||||
|
418,270 |
||||||
| Gross margin | ||||||
| Operating expenses | ||||||
| Selling expenses |
$78,540 |
|||||
| Administrative expenses |
156,760 |
|||||
| Depreciation/Amortization expense |
40,210 |
|||||
| Total operating expenses |
275,510 |
|||||
| Income from operations |
142,760 |
|||||
| Other revenues/expenses | ||||||
| Gain on sale of land |
7,960 |
|||||
| Gain on sale of short-term investment |
4,000 |
|||||
| Dividend revenue |
2,380 |
|||||
| Interest expense |
(51,710 |
) |
(37,370 |
) |
||
| Income before taxes |
105,390 |
|||||
| Income tax expense |
39,370 |
|||||
| Net income |
66,020 |
|||||
| Dividends to common stockholders |
(32,020 |
) |
||||
| To retained earnings |
$34,000 |
|||||
Prepare a statement of cash flows for Sarasota Company using the
direct method accompanied by a reconciliation schedule. Assume the
short-term investments are debt securities, classified as
available-for-sale.
In: Accounting
Carla Corporation provides a defined contribution pension plan
for its employees. Under the plan, the company deducts 5% of each
employee’s gross pay for each bi-weekly pay period. The company
also contributes 6% of the employees’ gross pay to the pension
plan. The combined pension contributions are then submitted to the
pension trustee within 11 days of the end of the month in which the
pay was earned.
For the first pay period of October (from Sunday October 1 to
October 14, 2020), Carla’s total gross payroll was $174,000. Total
gross payroll for the period October 15 through Saturday, October
28, 2020, was $173,000. The total anticipated payroll for the
period October 29 through November 10, 2020, was $169,000
(employees worked Monday through Friday each week). On November 10,
2020, Carla submitted the pension contributions to the trustee for
the month of October (including accruals up to and including
October 31).
Prepare the October 14 journal entry to record the payroll,
including employee and employer contributions to the pension plan.
For simplicity, ignore income taxes and other statutory deductions.
(Credit account titles are automatically indented when
the amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for
the amounts.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
October 14 |
|||
|
(To record payment of salaries and wages expense) |
|||
|
(To record company portion of pension expense) |
Prepare the October 28 journal entry to record the payroll,
including employee and employer contributions to the pension plan.
For simplicity, ignore income taxes and other statutory deductions.
(Credit account titles are automatically indented when
the amount is entered. Do not indent manually. If no entry is
required, select "No Entry" for the account titles and enter 0 for
the amounts.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
October 28 |
|||
|
(To record payment of salaries and wages expense) |
|||
In: Accounting
Problem 23-04
Sarasota Company had the following information available at the end of 2020.
|
SARASOTACOMPANY |
||||||
|
2020 |
2019 |
|||||
| Cash |
$9,950 |
$4,010 |
||||
| Accounts receivable |
20,550 |
12,960 |
||||
| Short-term investments |
21,830 |
29,800 |
||||
| Inventory |
42,340 |
35,030 |
||||
| Prepaid rent |
2,990 |
12,090 |
||||
| Prepaid insurance |
2,090 |
91 |
||||
| Supplies |
990 |
75 |
||||
| Land |
124,970 |
174,030 |
||||
| Buildings |
353,000 |
353,000 |
||||
| Accumulated depreciation—buildings |
(104,980 |
) |
(86,810 |
) |
||
| Equipment |
522,130 |
396,610 |
||||
| Accumulated depreciation—equipment |
(128,890 |
) |
(111,580 |
) |
||
| Patents |
44,790 |
49,520 |
||||
| Total assets |
$911,760 |
$868,826 |
||||
| Accounts payable |
$21,970 |
$31,740 |
||||
| Income taxes payable |
5,030 |
3,980 |
||||
| Salaries and wages payable |
4,980 |
3,020 |
||||
| Short-term notes payable |
10,080 |
10,080 |
||||
| Long-term notes payable |
60,150 |
70,050 |
||||
| Bonds payable |
396,540 |
396,540 |
||||
| Premium on bonds payable |
23,170 |
27,926 |
||||
| Common stock |
241,390 |
218,640 |
||||
| Paid-in capital in excess of par—common stock |
25,100 |
17,500 |
||||
| Retained earnings |
123,350 |
89,350 |
||||
| Total liabilities and stockholders’ equity |
$911,760 |
$868,826 |
||||
|
SARASOTA COMPANY |
||||||
| Sales revenue |
$1,170,900 |
|||||
| Cost of goods sold |
752,630 |
|||||
|
418,270 |
||||||
| Gross margin | ||||||
| Operating expenses | ||||||
| Selling expenses |
$78,540 |
|||||
| Administrative expenses |
156,760 |
|||||
| Depreciation/Amortization expense |
40,210 |
|||||
| Total operating expenses |
275,510 |
|||||
| Income from operations |
142,760 |
|||||
| Other revenues/expenses | ||||||
| Gain on sale of land |
7,960 |
|||||
| Gain on sale of short-term investment |
4,000 |
|||||
| Dividend revenue |
2,380 |
|||||
| Interest expense |
(51,710 |
) |
(37,370 |
) |
||
| Income before taxes |
105,390 |
|||||
| Income tax expense |
39,370 |
|||||
| Net income |
66,020 |
|||||
| Dividends to common stockholders |
(32,020 |
) |
||||
| To retained earnings |
$34,000 |
|||||
Prepare a statement of cash flows for Sarasota Company using the
direct method accompanied by a reconciliation schedule. Assume the
short-term investments are debt securities, classified as
available-for-sale.
In: Accounting
Astro Co. sold 19,500 units of its only product and incurred a $45,700 loss (ignoring taxes) for the current year, as shown here. During a planning session for year 2020’s activities, the production manager notes that variable costs can be reduced 50% by installing a machine that automates several operations. To obtain these savings, the company must increase its annual fixed costs by $145,000. The maximum output capacity of the company is 40,000 units per year.
| ASTRO COMPANY Contribution Margin Income Statement For Year Ended December 31, 2019 |
|||||
| Sales | $ | 721,500 | |||
| Variable costs | 577,200 | ||||
| Contribution margin | 144,300 | ||||
| Fixed costs | 190,000 | ||||
| Net loss | $ | (45,700) | |||
1. Compute the break-even point in dollar sales for 2019. (Round your answers to 2 decimal places.)
2. Compute the predicted break-even point in dollar sales for 2020 assuming the machine is installed and there is no change in the unit selling price. (Round your answers to 2 decimal places.)
3. Prepare a forecasted contribution margin income statement for 2020 that shows the expected results with the machine installed. Assume that the unit selling price and the number of units sold will not change, and no income taxes will be due. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.)
4. Compute the sales level required in both dollars and units to earn $150,000 of target pretax income in 2020 with the machine installed and no change in unit sales price. (Do not round intermediate calculations. Round your answers to 2 decimal places. Round "Contribution margin ratio" to nearest whole percentage)
5. Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume no income taxes will be due. (Do not round intermediate calculations. Round "per unit answers" to 2 decimal places.)
P.S. 1, 4, and 5 are the ones I mainly need help with.
In: Accounting
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|
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|
In: Accounting
Sandhill Company had the following information available at the
end of 2020.
|
SANDHILLCOMPANY |
||||||
|
2020 |
2019 |
|||||
| Cash |
$10,100 |
$4,020 |
||||
| Accounts receivable |
20,580 |
12,830 |
||||
| Short-term investments |
22,020 |
29,750 |
||||
| Inventory |
42,390 |
34,710 |
||||
| Prepaid rent |
3,020 |
12,030 |
||||
| Prepaid insurance |
2,100 |
89 |
||||
| Supplies |
1,000 |
74 |
||||
| Land |
125,640 |
176,140 |
||||
| Buildings |
347,130 |
347,130 |
||||
| Accumulated depreciation—buildings |
(104,250 |
) |
(87,940 |
) |
||
| Equipment |
530,080 |
398,810 |
||||
| Accumulated depreciation—equipment |
(130,600 |
) |
(111,650 |
) |
||
| Patents |
44,570 |
49,920 |
||||
| Total assets |
$913,780 |
$865,913 |
||||
| Accounts payable |
$22,110 |
$32,240 |
||||
| Income taxes payable |
5,010 |
4,010 |
||||
| Salaries and wages payable |
5,000 |
2,990 |
||||
| Short-term notes payable |
10,010 |
10,010 |
||||
| Long-term notes payable |
59,650 |
70,450 |
||||
| Bonds payable |
402,050 |
402,050 |
||||
| Premium on bonds payable |
19,870 |
21,533 |
||||
| Common stock |
241,660 |
220,690 |
||||
| Paid-in capital in excess of par—common stock |
24,940 |
17,540 |
||||
| Retained earnings |
123,480 |
84,400 |
||||
| Total liabilities and stockholders’ equity |
$913,780 |
$865,913 |
||||
|
SANDHILL COMPANY |
||||||
| Sales revenue |
$1,161,810 |
|||||
| Cost of goods sold |
753,770 |
|||||
|
408,040 |
||||||
| Gross margin | ||||||
| Operating expenses | ||||||
| Selling expenses |
$79,370 |
|||||
| Administrative expenses |
150,640 |
|||||
| Depreciation/Amortization expense |
40,610 |
|||||
| Total operating expenses |
270,620 |
|||||
| Income from operations |
137,420 |
|||||
| Other revenues/expenses | ||||||
| Gain on sale of land |
7,980 |
|||||
| Gain on sale of short-term investment |
4,040 |
|||||
| Dividend revenue |
2,410 |
|||||
| Interest expense |
(51,610 |
) |
(37,180 |
) |
||
| Income before taxes |
100,240 |
|||||
| Income tax expense |
39,060 |
|||||
| Net income |
61,180 |
|||||
| Dividends to common stockholders |
(22,100 |
) |
||||
| To retained earnings |
$39,080 |
|||||
Prepare a statement of cash flows for Sandhill Company using the
direct method accompanied by a reconciliation schedule. Assume the
short-term investments are debt securities, classified as
available-for-sale.
In: Accounting
Delta Corporation has owned 45% of the voting stock of Egret Company for many years, originally purchased at book value and reported using the equity method. Egret has reported significant net losses in recent years, and at the beginning of 2019, the carrying value of the investment is $1,000,000. Egret reports a loss of $3,000,000 for 2019, and the loss is considered other than temporary. In 2020 Egret unexpectedly reports net income of $900,000. Required:
a. What amount should Delta report on its 2019 income statement as equity in net loss of Egret?
b. What amount should Delta report on its 2020 income statement as equity in net income of Egret
In: Accounting
Company A purchases a stamping press on July 1, 2020. The press cost $53,000 and management estimates its salvage value and useful life to be $3,000 and 5 years, respectively. TC recognizes depreciation on a straight-line basis and sells the equipment on January 1, 2023 for $11,000. Instructions Compute the following amounts:
1. Total depreciation expense - 2020 $
2. Total depreciation expense - 2021 $
3. Accumulated depreciation - 12/31/2022 $
4. Net book value of the stamping press - 12/31/2022 $
5. Gain (loss) on sale - 1/1/2023 $
6. Gain (loss) on sale assuming a sales price of $0 $
In: Accounting