Question4) (a) What is the nature of the alleged SEC charges which Viscotech and its principals may face?
Due to the fact that attorney Benjamin is unsure about the breach or avoidance of any of the SEC regulations while the funds were raised, hence, if it is proved that Viscotech has not followed any of the SEC regulations or he has been found in the misconduct of the business then the nature of the SEC charges would be fine on Viscotech. Additionally, the SEC can deregulate Viscotech in which case Viscotech will not be able to raise funds from the general public, hence, its access to the capital market will become limited and Viscotech will have to rely on the equity finance provided by the principals or venture capitalists.
Question4) (b) In your opinion, have the principals done anything unethical?
Since the principals of Viscotech hadattempted to raise the money through medical investment fund trust (MIFT), further, MIFT was intended to be used as a vehicle for raising finance that would be used in Viscotech. Additionally, the investment amounts were received by Viscotechbefore the official offering circulator was circulated. Meanwhile, the potential investors were not told about the purpose of that venture capital. Further, the Confidential Investment Memorandum and Recession Offer was still not finalized which contained the business prospect and the risk that the investment in Viscotech was exposed to. Meanwhile, the companiesraising funds from the public and involves tax credit that need to be calculated.However, Viscotech raised money from the public knowing that the money is not being raised for investment by MIFT independently. Instead of that, Viscotech intestinally tried to deceive people, which was unethical conduct of a business.
Question4) (c) What could have been done to avoid these difficulties?
Viscotech should have avoided the acceptance of moniesbefore officially circulating the offering circular, further, Viscotech should not have used the MIFT as a vehicle or otherwise thepotential investors should have been told inadvance that their investment will be used in Viscotech and they should be told regarding risk to which their investment will be exposed to.
Question5) How much is the business worth?
Using the three years forecasted income statement of Viscotech, the cash flows have been produced with the assumption that they will grow as per the historical rates. Meanwhile, the discount rate has been calculated using the WACC formula. Additionally, terminal values have been incorporated in ten years’ cash flows. Therefore, based on the analysis of discounted cash flows the present value of the operations of Viscotech has been calculated as $7.485,606/. Meanwhile, the total number of shares outstanding at the end of 1999 has been considered in order to calculate per share price. Hence, per share price of Viscotech has been calculated at $51.94/.Onthe other hand valuation of Viscotech has also been calculated using the price to earnings multiplier.However, based on the P/E multiplier, initially the value of Viscotech is lower, butas it improves its operation and increases the revenue growths its value also increases..................................
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