Calculate the current asset value of this venture

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Reference no: EM132010257

Suppose a new venture promised the following payments in 5 years with the associated probabilities as listed.

   Payoff Probability

   80,000,000 10%

   110,000,000 20%

   140,000,000 40%

   170,000,000 20%

   200,000,000 10%

Assume the risk free rate is 4% (annual compounding). If the venture were financed entirely with equity, the required cost of capital would be equal to 10% (4% risk free rate plus a 6% risk premium).   

Based on the information above, calculate the current asset value of this venture. This is the same as the value of the company if it was financed entirely with equity.

Reference no: EM132010257

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