Review of Investment Proposals for RTI and MGMT

Review of investment Proposals

Executive summary:
The assignment is a representation of a comprehensive report about how the chosen organization
RTI(Raju Technology, Inc) which is looking for asking some profitable investment in some
small scale companies just like MGT 2700, Inc. (MGMT) by describing the positive and
negative aspects of the chosen investment proposal. The main objective of preparing the report is
to provide some guidance to the leaders of RTI so that they can choose the proper investment
instrument between equity investment and convertible debenture while investing in the chosen
company MGMT. The report also analyse the importance of IPO investment in comparison to
private invest to explain to the leaders of IRFT to describe that to what extent the company
MGMT will be interested to accept the private investment offerings. The report also makes a
comprehensive discussion regarding the future operating cash generating capacity of MGMT so
that the leader of RTI can properly understand the pros and cons of the investment proposal of
making investment in MGMT.

Table of Contents
Q1....................................................................................................................................................4
Advantages and disadvantages for MGMT to seek private equity financing from RTI rather than
undertaking an IPO..........................................................................................................................4
Q2....................................................................................................................................................5
Operating cash flow forecast for MGMT for years 2018 to 2022 (five years) using the
Projections of the investment bank, Appendix-1.............................................................................5
Q3.Justification of underlying assumptions of the Investment bank...............................................6
Q4....................................................................................................................................................7
Estimated weighted average cost of capital for MGMT assuming that the business is an all-equity
business entity, Appendix-2.............................................................................................................7
Q5 Calculation of DCF model using the concept of OCF, Appendix-3..........................................8
Q6 Suggestions regarding buying the GY apps by MGMT, Appendix-4.......................................9
Q7..................................................................................................................................................10
Advantages and disadvantages of investment in equity or a convertible subordinated debenture10
Reference:......................................................................................................................................11
Appendix:......................................................................................................................................12

Q1.
Advantages and disadvantages for MGMT to seek private equity
financing from RTI rather than undertaking an IPO
If the MGMT seek private financing from RTI then it is going to enjoy the following advantages:
The company MGMT is choosing a well-known investor RTI knowing its efficiency and return
generating capacity.
The private investment will save MGMT from the risk of IPO failure
The other benefit of staying private is to minimize the down side risk by investing in a specific
company and thus the company MGMT will only be answerable to RTI at the event of loss
instead of being answerable to thousands of outside investors which will be the case if IPO
investment is done(Levis, 2011)
The major disadvantages of staying private can be identified as follows:
On the other hand IPO investment will allow the company MGMT to raise lot of cash and to
enhance the financial image of the company which is, not possible from accepting private
investment.
Acceptance of private investment will not allow MGMT to use its stock as currency where the
benefit is available under IPO investment where the stocks are being traded in the exchange like
currency and generates money(Bruton et al.,2010).
The other major disadvantage of private investment is that it does not offer the scope to the
company MGMT to promote the company in public which can easily be done by IPO investment