The venture capital fund, BBC Ventures, made a $8 million investment in Rearden Company 10 years ago and, in return, rec

[answerhappygod]

The venture capital fund, BBCVentures, made a $8 million investment in Rearden Company10 years ago and, in return, received 2 million shares of series Aconvertible preferred shares. Each of these shares is convertibleinto 3 Rearden ordinary shares. Five years later, BBC Venturesparticipated in a second round of financing for Rearden andreceived 4 million shares of series B convertible preferred sharesin exchange for a $50 million investment. Each series B share isconvertible into 2 Rearden ordinary shares.
Currently, it is 2022 and Rearden isplanning to take the firm public through an IPO, but it mustconvert all its outstanding convertible preferred shares intoordinary shares before the offering. After conversion, Rearden willhave 30 million ordinary shares outstanding and will create another8 million new ordinary shares for salein the IPO. The underwriter handling Rearden’s initial offeringcharges 7% of the gross proceeds as an underwriting fee.Reardenforecasts that the 2022 cash flow from operations will be$380 million. Assume that the underwriter has prohibitedexisting shareholders (including BBC Ventures) from selling any oftheir shares in the IPO.
(3marks)
(2 marks)
(3 marks)
[Total for Question 1: 8 marks]