Sheet 1: Copyright Notice

	
	

		

 
	
	
	

		
	

		
Fundamentals of Entrepreneurial Finance
	
	

		
© 2020 Marco Da Rin and Thomas Hellmann
	
	

		
Chapter 04
	
	

		
The mechanics of ownership and valuation
	



Sheet 2: Valuation Notation

	
	
	

		
Symbol
		
Meaning 
	
	

		
CCR
		
Cash-on-cash return
	
	

		
d
		
Discount rate
	
	

		
FINV
		
Ownership fraction of new investors
	
	

		
FPRE
		
Ownership fraction of pre-investment shareholders
	
	

		
FSOP
		
Ownership fraction of the stock options pool
	
	

		
I 
		
Investment amount
	
	

		
IRR
		
Internal rate of return
	
	

		
NVP
		
Net present value
	
	

		
SINV
		
Number of shares of new investors
	
	

		
SPOST
		
Number of shares outstanding after the investment round
	
	

		
SPRE
		
Number of shares of pre-investment shareholders
	
	

		
SSOP
		
Number of shares allocated to the stock options pool
	
	

		
t
		
time
	
	

		
T
		
Investment duration
	
	

		
VPOST
		
Post-money valuation
	
	

		
VPRE
		
Pre-money valuation
	
	

		
X
		
Exit Value
	



Sheet 3: Pre-money and Post-money

	
	
	
	

		
Pre-money and post-money valuation
		


		


	
	

		
(this table replicates and extends material in section 4.1.1 of the book)
		


		


	
	

		
green background = input cells (from which formulas derive results)
		


		


	
	

		


		


		


	
	

		
Investment
		
500,000
		


	
	

		
Ownership fraction of pre-investment shareholders
		
40%
		


	
	

		


		


		


	
	

		
Post-money valuation:
		
VPOST = I /FINV
		
1,250,000
	
	

		
Pre-money valuation:
		
VPRE = VPOST - I
		
750,000
	
	

		
Post-money valuation:
		
VPOST = VPRE + I
		
1,250,000
	
	

		
Investment:
		
I = FINV * VPOST
		
500,000