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1

$10- $30

1. Suppose that ROSS is considering a $10M Series A investment in MIC. ROSS proposes to structure the investment as 3M shares of convertible preferred stock (CP). The employees of ROSS have claims on 10M shares of common stock. Following the Series A investment, MIC will have 10M common shares outstanding and would have 7M shares outstanding on conversion of CP. The fees are $20M. Investment Capital is $80M.

- Compute the LP cost for this investment

- Solve for the LP valuation equation for this investment

2. All CP Investors all have 20% carry interest. Assume that Series D, E and F investors all have committed $100M investment capital.

- Series A: $2M for 10M shares (EBV)

- Series B: $11M for 10M shares (Talltree)

- Series C: $10M for 10M shares (Owl)

- Series D: $15M for 10M shares (2X liq pref) (Series D investors)

- Series E: $10M for 10M shares (3X liq pref) (Series E investors)

- Series F: $30M for 10M shares (Series F investors)

What is the conversion order for these investors?

3. Explain the Base-case option pricing assumptions. How do we deal with volatility?

4. Define what is meant by Redemption Value (RV). Explain the process of Redemption Value per Share (RVPS).

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