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Venture Capital question

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1. True, False, or Uncertain. Other things being equal, an increase in the volatility of the underlying asset will increase the value of the call option on that asset. Explain.

 

2. What do we need to calculate to determine the cost of capital for comparable companies? Why?

 

3. True/False or Uncertain: The harmonic mean will always provide a lower valuation than the geometric mean, which in turn will always provide a lower valuation than the median.

 

4. True/False or Uncertain: The levered beta for a company is always greater than or equal to the unlevered beta for the same company.

 

5. Suppose that Owl invests in Newco across several venture rounds. After one of these rounds of investments, Owl draws an exit diagram as shown in Exhibit 13-2.

 

(a) What is the portfolio of options corresponding to this exhibit?

 

(b) Suppose the founders of Newco own one-half of everything not owned by Owl. What is the portfolio of options corresponding to the founder’s ownership?

 

the book can be found here:

http://www.stpia.ir/files/Venture%20Capital%20and%20Finance%20of%20Innovatoin.pdf

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