Solution Pages: 2
Files that you will download:
Word (.docx) & Excel (.xlsx)
Questions Covered in the Solution
- Firm Value of RBS?
- Given the transaction proposed in the term sheet, calculate pre and post-money valuation of RBS?
- Provide a discussion on the above two questions compared to valuation mentioned in the case?
- If you were Bob O Conner, what concerns would have with this transaction? would you do transaction on these terms?
Sample of Solution
Firm Value of RBS
Financial projections by RBS has been considered to be little ambitious with the growth targets of 150.8% for 1999 and 102.8% for 2000 as the industry’s leader “Great Plains” has realized the growth of 35% in the last year. However, RBS does have significant potential to use the additional capital to be raised to fuel such an exponential growth. Hence, in estimating the eventual value of RBS we slashed the projected revenue numbers by 10%. Eventually, while calculating the terminal value of RBS we assumed the long-term growth rate for the company would be 12% considering the dynamics and company’s strategic position in the established Fin SW market.
So, Firm value if calculated to be $8.8 Million (Calculations in attached Excel File)