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    Subeo versus Dragon's Den

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    The inventor of Subeo, a UK company that was formed in 1993 to develop small state-of-the- art underwater vehicles, is looking for a substantial investment from the dragons. You will see in the attached transcripts that a heated discussion arises about the value of Subeo's assets. Ultimately, the asset debate and related firm value leads to an unexpected outcome for Subeo. After review the attached transcripts, please answer the following questions and use the attached Excel file for brainstorming. Please keep in mind the accounting for assets and explain the impacts on profit and cash flows from depreciation methods, disposals and impairments of assets.
    DDen Part I (Transcript) is attached
    DrDen Part II (Transcript) is also attached
    1. Based on the proposed deal, at how much do the inventors value their company?
    2. What are the company's projected unit sales, dollar sales, expenses, and earnings?
    3. Record the effect of past and expected transactions on B/S, I/S and SCF. Specifically, prepare the company's B/S, I/S, and SCF right before and after the proposed deal. Prepare the company's B/S at the end of year 4. Could you justify alternative B/S? The Dragons argued about assets on the B/S. What (if any) assets will be there?
    4. Suppose the company will generate $800,000 net profit in years 3,4,5, etc. Suppose the cost of equity capital is 19%. What is the value of the company?
    5. Why do you think the dragons decided not to invest into the company?

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    Solution Summary

    This solution provides a case analysis of Dragon's Den.