...Hochschule Rosenheim University Of Applied Sciences Financial options What options does a start up have to finance itself in the current market? Seminar paper University of Applied Sciences Fachhochschule Rosenheim faculty of business administration Presented by: Nicolas Jacobs Sebastian Zeitz Date: 12/18/2013 Address: Hochschulstraße 1 83024 Rosenheim E-mail: nicolasjacobs1@gmail.com sebastian.zeitz@stud.fh-rosenheim.de Matr. -Nr.: 822416 739045 Advisor: Prof. Dr. Ralph Kriechbaum Table of Contents 1. Introduction 3 1.1 Current market situation 3 1.2 Economic role of start-ups 4 2. Start-up life cycle 4 2.1 Early business stages 5 2.1.1 Seed stage 5 2.1.2 Start-up stage 5 2.1.3 Early stage 5 2.2 Expansion stages 5 2.2.1 Second stage 5 2.2.2 Third stage 6 2.3 Late business stages 6 2.3.1 Mezzanine phase 6 2.3.2 Bridge phase 6 2.3.3 Liquidation phase 6 3. Financial options 7 3.1 Seed financing sources 7 3.1.1 Angel investors 7 3.1.2 Incubators 8 3.1.3 Accelerators 8 3.1.5 Vendor Financing 9 3.1.6 Crowdfunding 9 3.2 Late financing sources 11 3.2.1 Mezzanine financing 11 3.2.2 Bridge financing 11 3.2.3 Initial Public Offering 12 3.2.4 Credits & Loans 12 4. A real life story 12 4.1 TransferWise 13 5. Conclusion 14 6. References 15 6.1 E-Books 15 6.2 Webpages 15 7. Honest declaration 16 1. Introduction This thesis has been written in the period of 9th of October and 18th of December...
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...Question #1: A “real option” is a choice that becomes available with a business investment opportunity. Real options can include opportunities to expand and cease projects if certain conditions arise. They are referred to as "real" because they usually pertain to tangible assets such as capital equipment, rather than financial instruments. Real options differ from financial options in that with financial options usually an underlying asset such as a stock is traded. Taking into account real options can greatly affect the valuation of potential investments. It does not obligate the owner to take any action, it just gives the right to buy or sell an asset. Examples of real options include developing new products expanding an existing product line, entry to a new geographical area as well as abandoning certain operations. There are several tools and techniques that are available for managers to analyze the profitability of a project. There is the discounted cash flows method which would ignore the option and calculate the net present value. There is a qualitative assessment that shows the value of the option increases is the project is risky or there is a long time that is needed to wait before exercising the option. The decision tree analysis is a tree like model that shows probable outcomes of the different decisions. Using the existing model for corresponding financial options, this resembles a financial call option. It is basically a call option with an expiration date ...
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... The material wealth of a society is a function of A. all financial assets. B. all real assets. C. all financial and real assets. D. all physical assets. 2. _______ are real assets. A. Land B. Machines C. Stocks and bonds D. Knowledge E. Land, machines, and knowledge 3. The means by which individuals hold their claims on real assets in a well-developed economy are A. investment assets. B. depository assets. C. derivative assets. D. financial assets. E. exchange-driven assets. 4. _______ are financial assets. A. Bonds B. Machines C. Stocks D. Bonds and stocks E. Bonds, machines, and stocks 5. _________ financial asset(s). A. Buildings are B. Land is a C. Derivatives are D. U.S. agency bonds are E. Derivatives and U.S. agency bonds are 6. Financial assets A. directly contribute to the country's productive capacity. B. indirectly contribute to the country's productive capacity. C. contribute to the country's productive capacity both directly and indirectly. D. do not contribute to the country's productive capacity either directly or indirectly. E. are of no value to anyone. 7. In 2012, ____________ was the most significant real asset of U.S. households in terms of total value. A. consumer durables B. automobiles C. real estate D. mutual fund shares E. bank loans 8. In 2012, ____________ was the least significant financial asset of U.S. households in terms of total value. A. real...
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...3140 S51 September 17, 2013 Team 2 Page |1 Critical Issues Critical issues In order to succeed and continue growth in the market, Bestwhen possible Services Inc. (Best)growth is very Be sure to define success specifically, and Financial quantitatively. Continuing must vague - this could mean several things, be more specific. address the following: 1) Create a business plan to ensure long term sustainability, Critical issues– you have identified the capacity issue correctly. nicely done. increase services- why does she need to do this? dig further to get to the critical issue. keep asking why. 2) Increase services available so Best can increase clients and retain current clients, and 3 )Have the ability to increase number of client load to ensure growth of company. Analysis In order for a business to meet goals and reach targets, it needs to have a business plan in place which clearly outlines what they are. Best has no business plan, because the owner has not had time to create one. This is a critical issue, because although employees of Best may be working very hard, they need to have goals in mind and measurable targets that they can achieve in order to stay current and adapt and grow with the industry changes. The financial planning industry is expected to grow in the near future, and in order to deal with the baby boomers retiring and taking their money out of investments, as outlined in the Exhibit 2, SWOT Analysis, there needs to be plan to ensure that...
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...Traditional VS Islamic Financial Derivatives To: Prof. Naser Abu Mustafa By: Mwaffaq Al Jayousi & Mohammad Al Shdooh Abstract This study focuses the light on defining financial derivatives and briefly describe their different types (Options, Forwards, Futures, Swaps, etc.). At the same time it tries to find if these financial derivatives exists in the Arab world, how they are implemented, and if we have an Islamic alternatives for them. Introduction There is a big debate in the Arab world regarding the usage of financial derivatives, Wither they are legal according to Islam or not, and If they are illegal in Islam; are there any Islamic alternatives to them. First we have to ask our self: Is there any need to use derivatives? And why they recently became so popular in the western countries? The need for financial derivatives emerges when people realize that there must be a way to reduce the risk associated with the trading of different kinds of goods. Risks such as price fluctuations and the uncertainty about the future market conditions. And since there are some people who are willing to bear this risk instead of us, this market took off and recently because of the communications revolution it flourished. Then why these financial derivatives did not reach the Arab world? The answer is simply because they hugely rely on speculations and anticipation; which are considered illegal according to Islam. But someone can ask: if it is illegal in Islam, then how come we...
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...FINANCIAL DERIVATIVES (A Future of Indian Financial Market) Dr. Ritu Kothiwal, Associate Professor, BIET, Hyderabad Contact No: 09246193330 Email Id: kothiwal55@gmail.com Mr. Ankur Goel, Research Scholar (Management), Mewar University, GZB. Contact No: 9917745990 Email Id: mrankurgoel@gmail.com. ABSTRACT Among all the innovations that have flooded the international financial markets, financial derivatives occupy the driver's seat. These specialized instruments facilitate the shuffling and redistribution of the risks that an investor faces. Thus aids in the process of diversifying ones portfolio. The volatility in the equity markets over the past years has resulted in greater use of equity derivatives. The volume of the exchange traded equity futures and options in most of the mature markets have seen a significant growth. It goes beyond that the local derivative in the emerging markets have witnessed widespread use of the derivative instrument for a variety of reasons. This continuous growth and development by the emerging market participants has resulted in capital inflows as well as helped the investors in risk protection through hedging. INTRODUCTION AND CONCEPT OF DERIVATIVES: Derivatives are financial contracts whose values are derived from the value of an underlying primary financial instrument, commodity or index, such as: interest rates, exchange rates, commodities, and equities. The International Monetary Fund defines derivatives as "financial...
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...Unit 6 Assignment GB550: Financial Management Alberto Silveira Kaplan University Prof: Ana Machuca April 11, 2011 Chapter 13: Problem 13-5: How is it possible for an employee stock option to be valuable even if the firm's stock price fails to meet shareholders' expectations? Solution: Employees are given the option of buying stocks at a specified time at a specified price without investing any money. For example, if the price of stock is $10 today and the employee is given the option to buy 1000 shares at the price of $10 per share two years from now. If the stock price increases to $12 per share in two years, then the employee will gain $2,000 ($2 x 1000) from these stock options. Let’s say that the expected capital appreciation was 20%, the value of the stock would have increased to $14.4 per stock. Even though the stock price fell short of the expected value, it still created additional income of $2,000 for the employee. The options pay off if, at the time of option expiration, the stock price is higher than the option’s strike price, even if the company failed to meet shareholders’ expectations. Chapter 15: Problem 15-8: The Rivoli Company has no outstanding debt and its financial position is given with the following data: Assets (book=market) $3,000,000 EBIT $500,000 Cost of equity, rs 10% Stock price, P0 $15 Shares outstanding n0 200,000 Tax rate, T (federal plus...
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...------------------------------------------------- Chapter 20 Decision Trees, Real Options, and Other Capital Budgeting Topics ------------------------------------------------- ANSWERS TO END-OF-CHAPTER QUESTIONS 20-1 a. Real options occur when managers can influence the size and risk of a project’s cash flows by taking different actions during the project’s life. They are referred to as real options because they deal with real as opposed to financial assets. They are also called managerial options because they give opportunities to managers to respond to changing market conditions. Sometimes they are called strategic options because they often deal with strategic issues. Finally, they are also called embedded options because they are a part of another project. b. Investment timing options give companies the option to delay a project rather than implement it immediately. This option to wait allows a company to reduce the uncertainty of market conditions before it decides to implement the project. Growth options allow a company to expand if market demand is higher than expected. This includes the opportunity to expand into different geographic markets and the opportunity to introduce complementary or second-generation products. It also includes the option (an abandonment option) to abandon a project if market conditions deteriorate too much. Flexibility options allow a company to have flexibility in their operations, such as the flexibility...
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...Options Theory Applied to Alternative Energy Industry Christina Clowdus Bus: 630 March 20, 2012 Dr. Shaw Introduction In life, you always have options. It is no different in capital investment. In today's unpredictable business world, managers recognize how risky the most valuable investment opportunities often are, and how useful a flexible strategy can be. That's why they want to know all their options. Yet many current financial assessment tools fail to identify what investors can do to capitalize on future uncertain events. “Managerial flexibility to adapt and revise future decisions in order to capitalize on favorable future opportunities or to limit losses has proven vital to long-term corporate success in an uncertain and changing marketplace” (Brennan, M.J. and E.S. Schwartz 1985, p. 15). Utilizing a real options strategy allows businesses to capture the value of managerial flexibility in adapting decisions in response to unexpected market developments. When used as a conceptual tool, real options allow management to characterize and communicate the strategic value of an investment project (Bjerksund, P. and S. Ekern 1990). Traditional methods (e.g. net present value, discounted cash flow) fail to accurately capture the economic value of investments in an environment of widespread uncertainty and rapid change. Using real options theory, managers can more effectively target crucial opportunities to redeploy, delay, modify, or even abandon capital-intensive projects...
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...FIN 100 WEEK 8 ASSIGNMENT 2 – BUSINESS FINANCING AND THE CAPITAL STRUCTURE To purchase this Click here: http://www.activitymode.com/product/fin-100-week-8-assignment-2-business-financing-and-the-capital-structure/ Contact us at: SUPPORT@ACTIVITYMODE.COM FIN 100 Week 8 Assignment 2 - Business Financing and the Capital Structure Businesses have to make many financial decisions that have a direct impact on operations and the ability to successfully compete in the marketplace. Base your writing on the information from the course coupled with information located in the Strayer databases or Internet. Write a three to four (3-4) page paper in which you: 1. Explain the process of financial planning used to estimate asset investment requirements for a corporation. Explain the concept of working capital management. Identify and briefly describe several financial instruments that are used as marketable securities to park excess cash. 2. Assume that you are financial advisor to a business. Describe the advice that you would give to the client for raising business capital using both debt and equity options in today’s economy. 3. Explain why a business may decide to seek capital from a foreign investor indicating the risk and rewards for such a decision. Provide support for rationale. More Details hidden... Click Here to Buy this; http://www.activitymode.com/product/FIN 100 Week 8 Assignment 2 - Business Financing and the Capital Structure Activity mode aims to provide...
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...In recent years especially with the financial crisis, a number of countries have found themselves needing a bail out of some sort. From the PIGS of Europe to South Asia and Africa. What all these countries have/had in common was the need for funds to facilitate a bailout of their faltering economies especially the banking sector. Like the countries that need a bail LDC always need money to finance their debt and pay off any interest especially in time of uncertainty. The purpose of this paper is to present a way for such countries to meet their financial needs and to protect their banking sectors. Unlike businesses or corporations, countries have access to natural resources which can be got and sold on the world market for a profit. Some countries even have an immediate market for their minerals like oil and gold. Almost all LDCs and a number of the other countries that needed bail out funds, have these resources that can be sold for profit. However in a situation where quick funds are needed, selling these resources would take a considerably long period of time which is not available at that instance. This can be remedied by the sell of long term covered call options on the resources of the different countries that need the funds. An options strategy is when an investor holds a long position (owns the asset: in our case mineral) in an asset and writes (sells) call options on that same asset in an attempt to generate increased income from the asset. This strategy is often...
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...Chapter 01 The Investment Environment Multiple Choice Questions 11. The material wealth of a society is equal to the sum of _________. A. all financial assets B. all real assets C. all financial and real assets D. all physical assets E. none of the above Financial assets do not directly contribute the productive capacity of the economy. 13. _______ are financial assets. A. Bonds B. Machines C. Stocks D. A and C E. A, B and C Machines are real assets; stocks and bonds are financial assets. Difficulty: Easy 14. An example of a derivative security is ______. A. a common share of General Motors B. a call option on Mobil stock C. a commodity futures contract D. B and C E. A and B The values of B and C are derived from that of an underlying financial asset; the value of A is based on the value of the firm only. 17. An example of a primitive security is __________. A. a common share of General Motors B. a call option on Mobil stock C. a call option on a stock of a firm based in a Third World country D. a U.S. government bond E. A and D A primitive security's return is based only upon the earning power of the issuing agency, such as stock in General Motors and the U.S. government. Difficulty: Easy 19. _________ financial asset(s). A. Buildings are B. Land is a C. Derivatives are D. U.S. Agency bonds are E. C and D A and B are real assets. Difficulty: Easy 20. The value of a derivative security _______. A. depends on the value of the related primitive...
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...Moving Average 2. Quotes 3. Commodities plots 4. Plots 2: "What is the conversion factor of a US Treasury bond if securities coupon is 6 percent 1. 1 2. 2 3. 3 4. 6 2: "Which of the following are market instruments that are low risks, highly liquid, short term debt instruments issued by governments, financial institutions and corporations? 1. Derivatives 2. Financial Assets 3. Money Market Securities 4. None of the Above 2: "According to this theory, movement in financial markets depends on attitudes of investors on the business cycle. 1. Dow Theory 2. Cycle Theory 3. Elliot Wave Theory 4. None of the above 2: "Which of the following is a measure of the average change in prices of goods and represent inflation at the consumer level 1. Consumer price index 2. Implicit price deflator 3. Gross domestic product 4. None of the above 2: "What Happens when fiscal policy is paralyzed due to political statement of budget constraints 1. Revert to the economic policy established by the goverment 2. Monetary policy will be relied on 3. Opt to the financial policy 4. None of the above 2: "Which of the following statement is not true 1. Volume measure the number of contracts traded and is a good indication of the intensity of a move reflecting and demand and supply 2. When prices are raising and volume increasing, we expect the trend to continue. 3. If price are rising...
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...further information the Unilever Annual Report & Accounts and Form 20-F 2003 should be consulted. Certain sections of the Unilever Annual Report & Accounts and Form 20-F 2003 have been audited. Sections that have been audited are set out on pages 73 to 125, 131 to 147 and 149 to 150. The auditable part of the Directors' Remuneration report as set out on page 68 has also been audited. The maintenance and integrity of the Unilever website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters. Accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially placed on the website. Legislation in the United Kingdom and the Netherlands governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Disclaimer Except where you are a shareholder, this material is provided for information purposes only and is not, in particular, intended to confer any legal rights on you. The Annual Report & Accounts and Form 20-F does not constitute an invitation to invest in Unilever shares. Any decisions you make in reliance on this information are solely your responsibility. The information is given as of the dates specified, is not updated, and any forward-looking statements are made subject to the reservations specified on page 3 of the Report. Unilever accepts no responsibility for any information...
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...productivity or low-quality products and/or lower wages, superior technology, and unfair trade practices by foreign countries. Which of these factors is likely to underlie the persistent U.S. trade deficits. Comment/Explain. Although popular opinion believes these factors are likely to underlie the trade deficits, none of these factors underlie the persistent U.S. trade deficits. These factors affect other countries more than the U.S. however run trade surplus. American trade deficits reflect the U.S. savings deficit. 2. Identify the correct BOP account for each of the following transactions. a. A German-based pension fund buys U.S. government 30-year bonds for its investment portfolio. Financial account: portfolio investment liabilities b. Scandinavian Airlines System (SAS) buys jet fuel at Newark Airport for its flight to Copenhagen. Current account: Goods: Exports FOB c. Hong Kong students pay tuition to the University of California, Berkeley. Current account: Services: credit d. The U.S. Air Force buys food in South Korea to supply its air crews. Current account: Goods: Imports e. A Japanese auto company pays the salaries of its...
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