University of California Irvine Common Stock Price in the WSC Company Paper

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User Generated

User

Qbbcbz

Subject

Business Finance

School

University of California Irvine

Question Description

I'm working on a data analytics case study and need an explanation to help me learn.

I tried to make a new decision tree based on your version and I use Exhibit 7 infromation to get a probabilty based one. Could you plz try to write up a rationale along with new decision tree for me!

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Sell 1:1 Common Stock Price (Market Value) Shares Preferred price Value Profit Total Number of Shares Common Stock Price (Market Value) Market Value Shares Preferred price Value Profit Total Common Stock Price (Market Value) Shares Shares after 10:1 Dilution Preferred price Value Profit Total 15.00 Series A1 1,500,000.00 1.00 1,500,000.00 21,000,000.00 41,250,000.00 Market Value per 1,500,000 22,500,000.00 Series A2 1,500,000.00 1.50 2,250,000.00 20,250,000.00 More with new investor 1,250,000.00 15.00 18,750,000.00 Bridge Warrants 1,250,000.00 1.50 1,875,000.00 16,875,000.00 64,166,671.50 Funding only 55% 15.00 1,031,250.00 Series A1 Series A1 687,500.00 68,750.00 1.50 103,125.00 928,125.00 5,053,125.00 416,667.00 15.00 6,250,005.00 416,667.00 0.50 208,333.50 6,041,671.50 15.00 2,250,000.00 1,500,000.00 150,000.00 1.00 150,000.00 2,100,000.00 Exact Pro-Rata Common Stock Price (Market Value) Shares Preferred price Value Profit Total A1+A2 3,000,000.00 41,250,000.00 15.00 2,250,000.00 Series A2 1,500,000.00 150,000.00 1.50 225,000.00 2,025,000.00 1,250,000.00 15.00 18,750,000.00 Bridge A1+A2 1,250,000.00 3,000,000.00 1.50 1,875,000.00 16,875,000.00 41,250,000.00 58,125,000.00 More W/O new investor Estimating Covering 50% of Blue Lock Number of Shares 1,250,000.00 416,667.00 Common Stock Price (Market Value) 15.00 15.00 Market Value 18,750,000.00 6,250,005.00 Bridge Warrants Shares 1,250,000.00 416,667.00 Preferred price 1.50 0.50 Value 1,875,000.00 208,333.50 Profit 16,875,000.00 6,041,671.50 Total 64,166,671.50 of Blue Lock A1+A2 3,000,000.00 41,250,000.00 40 Supporting Bridge Funding 60 % Yes No Able to Find New Investors? Convert Preferred stock to Common stock. Ratio 1:1 40 % Yes 60 % No Level of Pro-Rata Funding? Level of Pro-Rata Funding? 45% 55% Profit = (((1,500,000 * Common stock price) - (1,500,000 * Series A1 preferred stock ($1.00 per share))+ ((1,500,000 * Common stock price)- (1,500,000 * Series A2 preferred stock ($1.50 per share))) 45% 55% Exact or More Underfund Exact or More Underfund 45% 45% Exact - Preferred Stock to Common Stock Ratio 1:1 55% Overfund - Awarded Warrants Quantity of Warrets: Overfunding / Series A2 purchase Price ($1.50) Exercise Price of $0.50 ALL - including previous series - preferred stock to common stock conversion ratio 10:1 Exact - Preferred Stock to Common Stock Ratio 1:1 55% Overfund Awarded Warrants Quantity of Warrets: Overfunding / Series A2 purchase Price ($1.50) Exercise Price of $050 ALL - including previous series - preferred stock to common stock conversion ratio 10:1 40% Supporting Bridge Funding 60% Yes No Able to Find New Investors? Convert Preferred stock to Common stock. Ratio 1:1 40% 60% Yes No $41,250,000 Level of Pro-Rata Funding? Level of Pro-Rata Funding? 45% 55% 45% 55% Exact or More Underfund Exact or More Underfund 55% 45% 55% Exact - Preferred Stock to Common Stock Ratio 1:1 45% Overfund - Awarded Warrants Quantity of Warrets: Overfunding / Series A2 purchase Price ($1.50) Exercise Price of $0.50 ALL - including previous series - preferred stock to common stock conversion ratio 10:1 Exact - Preferred Stock to Common Stock Ratio 1:1 Overfund - Awarded Warrants Quantity of Warrets: Overfunding / Series A2 purchase Price ($1.50) Exercise Price of $0.50 ALL - including previous series - preferred stock to common stock conversion ratio 10:1 S¢ °, 99 $58,125,000 $5,053,125 $58,125,000 $64, 166,671.50 $5,053,125 Depending on split: $58,125,000 or $64,166,671.50
Purchase answer to see full attachment

Tags: economic growth market value Income Statement Global Market Common Stock Price

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Explanation & Answer

View attached explanation and answer. Let me know if you have any questions.

WSC Decision Tree and rationale
WSC company s currently contemplating on whether to provide the bridge financing or not. However, based on the current market situations, the
company has to weigh whether to invest in the fast-growing software company or whether to invest in Fast ion which is in the clean tech sector. Recently,
the clean tech sector has been displaying unfavorable outcomes which is expected to remain relatively low in the near future. On the other hand, a market
survey has displayed that venture capital investors have high hope for a growth in the software sector as compared to cleantech. The current dilemma
facing the company is whether to provide the bridge financing as a commitment towards Fast ion or abandon the investment and invest in the fastgrowing software sector.
Decision 1.
Abandon the investment made in fast ion company and face the consequences where the preference shares of 1,500,000 (Serie A and Serie b) will be
converted to ordinary shares at a rate of 1:1.
W1
Sell 1:1
Market Value per
1,500,000
Common Stock Price (Market
Value)
15.00
22,500,000.00
Series A1
Series A2
Shares

1,500,000.00

1,500,000.00

Preferred price

1.00

1.50

Value

1,500,000.00

2,250,000.00

Profit

21,000,000.00

20,250,000.00

Total

41,250,000.00

Decision 2;
If the company choses to go ahead with the investment to bridge the 5,000,000 deficits; it also has to ...