1you are a venture capitalistyou are estimating a new

Assignment Help Corporate Finance

Reference no: EM13381885

1 You are a venture capitalist.

You are estimating a new project will have a beta of 5.

What is your required return, using the CAPM, if risk free rate is 5% and the market risk premium is 4%?

2 What is the Cash flow to owners, given the following information:

(Calculate After tax cash flow after Capex)

Cash from operations				650
Tax Rate				28%
Interest Expense				135
Depreciation				245
Total Debt payment (P + I)				235
Capital Expenditures				55

2. Assume a venture capitalist became your partner by injecting $500k into common equity of your company.

The venture capitalist / partner owns 50% of the entity, a "C" corporation (fully taxable entity).

Assume the entity is stabilized and sustaining and produces the following cash flows:

These are considered retained earnings after CapEx and all debt service; able to be distributed to owners.

without any detriment to the entity.
$ in '000's
Year 1 2 3 4 5
Cash Flows 250 265 275 277 285

These cash flows are distributed to owners of the corporation.

Furthermore, at the last day of year 5, the firm is sold for 5 times cash flow.

The Venture capitalists tax rates are as follows:

Ordinary income 28%

Capital Gains 15%

What is the IRR achieved for the VC?

Attachment:- Capital-Sourcing.xls

Reference no: EM13381885

Questions Cloud

1-a rapid corporate growth in sales and profits can cause : 1-a rapid corporate growth in sales and profits can cause financing problems. elaborate on this statement.1-b discuss

Breakeven analysismanagement believes it can sell a new : breakeven analysismanagement believes it can sell a new product for 250.first scale of operations fixed costs of

Short-term financial planning for the pdc company was : short-term financial planning for the pdc company was described earlier in this chapter. refer to the pdc companys

The ceo of the parent company agrees with numerous : the ceo of the parent company agrees with numerous practitioners who promote the use of nonfinancial measures as well

1you are a venture capitalistyou are estimating a new : 1you are a venture capitalist.you are estimating a new project will have a beta of 5.what is your required return using

Two questions1find an example when an organisation took up : two questions1find an example when an organisation took up too much risk and was unable to cope with it. give a short

Identify a risky and a safe investment and provide : identify a risky and a safe investment and provide rationale to justify your choices. also discuss the trade-off of

1 suppose that there are two calls on the same stock one : 1. suppose that there are two calls on the same stock one with exercise price k of 30 the other 35. the market value

User Account

All Pages