QUESTION 1: Evaluating a Business/Investment Opportunity.
Earlier in the semester we studied a subject called "Opportunity Recognition"; as fully discussed in the assigned chapter 5, starting on page 21,of your textbook. In the Entrepreneurial Finance lingo such a topic is also referred to as Due Diligence, Screening Opportunities, or simply Evaluation. (Note: Evaluation is different from Valuation where we assign a Value or Price to a given project using different Valuation Methods that you also have studied in this class.) In this question, your task is as follows.
Given the above background and by applying what you have especially learned from the assigned topic/chapter as stated in above, Evaluatean apparently fast-emerging new business opportunity in the FinTechindustry that is called Kensho https://www.kensho.com .
To learn about Kensho, take a look at the attachedthree-article file as a starter and do more search on the Net to better educate yourself about the said company, its competitors, and other related info that you may need to answer this question.
In answering this question feel free to use any model, guide, or framework that is offered in the mentioned book chapter; mainly chapters 5 of your textbook. As part of your responseand after your comprehensive evaluation of the said venture, also answer the following question: Is Kensho a good business opportunity (investment) for a Venture Capital or a Private Equity Firm? Explain why yes, or why no. Be well organized, systematic and clear.
QUESTION 2.
As you have learned in this class, risk plays a central role in decisions related to financing, growth, and exit strategies. However, risk consideration also plays a key role in decisions related to resource procurement and resource utilization especially by startup entrepreneurs. (Examples of resources include machinery and equipment and similar capital assets.) Given this brief background on the issue, what have you learned, if anything, in this class that can help you as an entrepreneur to minimize your risk exposures that come about as a result of your efforts in obtaining and utilizing the needed resources for your venture? In other words, are there specific risk-minimizing business strategies that you can use in your attempts to obtain and utilize the needed resources like machinery or expensive tools for your startup venture? Explain your answers in the needed details and make sure you also explain how risk is lowered as a result of your suggested strategies.
Be clear and organized in your response to this and any other question. (Being organized means you categorize the key elements of your response so that the reader, in this case I, can better follow your chain of thoughts and writing.)
Maximum pages allowed for this question: 2, double-spaced, size 12.
QUESTION 3.
Use the Free Cash Flow method of valuation and the following information, to calculate the value for a venture with the following characteristics. Expected revenue at year zero (or beginning of year 1): $4.0 million; growth rate in revenue for the first seven years: 25%; and for years 8-on: 10%; Annual profit margin or EBIAT/Sales for all years=22%; Annual asset intensity ratio or (FA+WC)/Sales for all years = 32%; discount rate in years 1-7: 35%, and in years 8-on: 20%.
Use Excel for this problem and not Word. Also make sure youset up your formulas correctly so that I could trace your work; in which case you should not be concerned about showing your work any further than what you do in your Excel file.
QUESTION 4.
You are given the following information:
• Baseline (last year or year 1) sales: $12.00 million
• Sales growth rate for years 1-7: 45%
• Sales growth rate for years 8-10: 25%
• Sales growth rate for years 11-on: 8%
• Profit margin for years 1-10: 35%
• Profit margin for years 11-on: 18%
• Discount rate or cost of capital: 30% during years 1-10; and 12% for years 11-on.
Answer the following questions:
1. What is the value of this company using the Fundamental Method of valuation?
2. For $3.0 million investment, what portion of the company should be given up?
3. Assume you are a financial consultant to the entrepreneur, and this entrepreneur has asked you to advise her regarding the $3.0 million financing. How will you go about advising your client? Outline your thought process in this regard.
Attachment:- Kensho_Opportunity_Evaluation.pdf