A.

Choose several peer companies for Box, Inc. and justify your choice. Choose several valuation multiples and
using comparable ratios of peer companies (as we did in Project 2 and discussed in Conferences) and Box, Inc.
financial information from prospectus, estimate the companys hypothetical stock price on January 22, 2015. It
is required for this question to list your major assumptions and properly reference sources of information that
you used in your calculations.

Peer Companies:
Ticker
PERIOD ENDING

Box, Inc.
BOX

Relevant Items from Income Statement and Balance Sheet

Shares Outstanding
Jan 22, 2015 Closing Price
Market Capitalization

Calculated Multiples

Box, Inc.

Your assumptions and Sources

Solution Legend
= Value given in problem
= Formula/Calculation/Analysis required
= Qualitative analysis or Short answer required

Using the same peers and industry data, please estimate Box, Inc. WACC. Show all your data
used for calculations. Again, please state all your assumptions and sources of information.

Your assumptions

Author:
Please replace stabs below by
real peers names. The
number of peers does not
have to be five

Company

Comparable Companies Unlevered Beta

Market Value Market Value
Levered Beta
of Debt
of Equity

Equity/
Debt/ Equity Total
Assets

Peer Company A
Peer Company B
Peer Company C
Peer Company D
Peer Company E
Median
Mean

Relevered Beta

Mean
Unlevered
Beta

Box, Inc.

WACC Calculation
Company's Capital Structure
Debt to Total Capitalization

Target
Target Debt/
Marginal Tax Relevered Beta
Equity
Rate

Equity to Total Capitalization

Debt to Equity Ratio
Cost of Equity
Risk-free rate
Market risk Premium
Levered Beta
Cost of Equity
Cost of Debt
Cost of Debt
Taxes
After Tax Cost of Debt
WACC

your data
ation.

Value given in problem

Formula/Calculation/Analysis required
Qualitative analysis or Short answer required

evered Beta
Marginal
Tax Rate

Unlevered Beta

Box, Inc. went public on January 22, 2015. How do your valuations compare to the
companys IPO price? How do they compare to its first trading day opening and
closing prices on January 23? If your valuations differ from observed prices, can you
briefly forward any possible explanations?

Your Estimated Price Range

Min
Max
Expected
IPO Price
Opening Price
Closing Price
Your explanation

In February 2011 Scale Venture Partners (SVP) III acquired 503,056 shares of Series D
preferred stock for aggregate consideration of $1,590,613. In August 2012 the same fund
acquired 38,183 shares of Series E preferred stock for aggregate consideration of
$500,003. The stock never paid dividend. At IPO all preferred stock was converted to
common shares and in exchange for its preferred shares SVP III received 6,711,857
common shares. If SVP III sold shares at IPO, what its annualized return would be? Did
SVP III actually sell at IPO (support your answer by evidence)? If SVP III sold shares at
market closing on July 21, what its annualized return would be?
Series D
Investment date
Investment
Shares invested

2/1/2011
$1,590,613
503,056
Series E

Investment date
Investment
Shares invested

8/1/2012
$500,003
38,183

IPO Date
Number of common shares
IPO Price
Total Value
Second Date
Price
Total value

6,711,857

7/21/2015

Solution
CF

Solution using XIRR

Date

Return at IPO
CF

Solution using XIRR

Date

42206Return on -409mmmm d, yyyy

Did SVP III actually sell at IPO? Support your answer by evidence

Value given in problem

Formula/Calculation/Analysis required
Qualitative analysis or Short answer

Part E

Solution Legend
= Value given in problem
= Formula/Calculation/Analysis required
= Qualitative analysis or Short answer required

The following information is for pedagogical purposes only and unlike earlier questions does not deal with real situation.
There are rumors that Box, Inc. is negotiating a three year agreement with, according to which Box, Inc. will have a right to sell its
medical HIPAA compliant software MedXT to an unidentified healthcare network at the beginning of any year in this three-year
period. Once Box, Inc. sells the software, it receives a one-time license fee of $ 500 M, but it cannot sell any of its products to
individual hospitals, members of the network. The current value of business with these hospitals to Box, Inc. is estimated to be $450
M. Each year this value can go up 20% or down 10% in comparison with the previous year. If the risk-free rate is 3%, how much
this agreement is worth to Box, Inc.? What should the company do over three years? Please provide as many details as possible in
your explanations and support them by numbers. (Hint: think about this as an American put option)

Part E

Risk-neutral probability formula

Given
Value Now
Value increase (%), u
Value decrease (%), d
Risk free Interest rate, r
License Fee (in $ millions)

450.00
20%
-10%
3%
500.00

exp( rt ) S d
exp rt (1 d )

Su Sd
ud

Risk-neutral probability
Discount factor (exp(-risk free rate))
Solution
Today

Year One

Value to Box, Inc. $

Value of waiting (NPV-Waiting)
Value of Exercising Option (NPV-Exercise)
Value

648.0000

486.0000

364.5000

540.0000

450.000

Year Two

405.0000

Year Three
$

777.6000

583.2000

437.4000

328.0500

Your recommendation

The terminal period growth rates were estimated such that the intrinsic valuation of the firm's equity would
equal the current market capitalization of the firm using the "Goal Seek" function.

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