PA2

This Professional Assignment (PA 2) requires a minimum of three (3) pages (excluding tables,
graphs, appendices, title, and reference pages) APA formatted Word Document in response
to the following questions. Your answers should be clear, well-organized, and specific. Provide
a concise, cogent argument and include details to support your response.
1. Suppose you become an intern at a local venture capital (VC) firm and are asked to
assist in due diligence on a proposed investment in a telecommunication company.
Explain how you would approach such a task and where and how you would structure
your investigation. What data sources would you use?
2. Assume the operation of your business resulted in sales of $730,000 last year. Year-
end receivables are $100,000. You are considering factoring the receivables to raise
cash to help finance your ventures growth. The factor imposes a 7% discount and
charges an additional 1% for each expected ten-day average collection period over 30
days.
a. Calculate the dollar amount you would receive from the factor for your receivables if
the collection period was thirty 30 days or less.
b. Compute the dollar amount you would receive from the factor for your receivables if
the average collection period was sixty days.
c. Show how your answer in Part (b) above would change if the factor charges an 8
percent discount and charges an additional 0.5% for each expected fifteen-day
average collection period over thirty days.

3. R.K. Maroon is a seed-stage web-oriented entertainment company with important
intellectual property. RKMs founders, all technology experts in the relevant area, are
anticipating a quick leap to dot-com fortune and believe that their unique intellectual
property will allow them to achieve a $100,000,000 venture value in Year 3 with a one-
time initial $2,000,000 in venture financing.
The founders have organized RKM with 1,000,000 shares and are willing to grant
venture investors a 100% return on their business plan projections.
a. What percent of ownership must be sold to grant the 100% three-year return?
b. If the owners want to keep their 1,000,000 shares, how many new shares should
they issue to the VCs
c. What would be the resulting ownership configuration?
d. Suppose the venture investors do not approve the business plan predictions and
want to price the deal assuming a second round in Year 2 of $8,000,000 with a 40%
return
If the owners want to keep their 1,000,000 shares, how many new shares should
they issue to the VCs for the second round of financing?
What would be the new ownership configuration?