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Question:
You are in a negotiation with a Venture Capitalist (VC). It is estimated that company cash flow will be $10 million next year, growing at a constant rate of 4% forever. The VC will inject an investment of $20 million into the company, as required to fund a key CAPX today (t=0). Your company is a private company and so there is considerable debate between you and the VC regarding the correct discount rate. You agree on the following facts. Your company will operate in unlevered form. The risk free rate is 2%. The market risk premium is 6%. The market's Sharpe Ratio is 1/3 (0.333). Your company's equity volatility is approximately 36% (0.36). Assuming the VC is entitled to the same compensation (risk premium) per unit of risk as the typical CAPM investor, estimate what fraction of the equity in your company the VC is entitled to, acknowledging that the VC will not be in a diversified position.
Calculate the monthly mortgage payment of principal and interest for the a loan with an initial balance of 150,000, an annual stated interest rate of 6%.
Is it better for a company to make sure that the products it offers its clients is 100% flaw free or is it better to get a product into the market quickly
You are the attending physician in the psychiatric department of a community hospital. For the last few weeks, there has been an increase in new patients
Catastrophic Disasters that could have been prevented
High-Growth potential company choice
The firm uses the CAPM to estimate the cost of common stock, and it does not expect to issue any new shares. What is its WACC?
Compute the failure rate for six transformers that were tested for 600 hours each, three of which failed after 100,175, and 350 hours.
"The Federal Reserve announced that it would open currency swap lines-in essence, printing dollars and exchanging them for euros." Why would the Fed and the European Central Bank enter into such an agreement?
Jan Murphy deposits $24,800 in the La Grange Community Bank today, and will not make additional deposits into the account (this is not an annuity problem).
Gardner Company currently makes all sales on credit and offers no cash discount. The firm is considering offering a 2% cash discount for payment within 15 days.
Comment on this statement: "Dividend valuation models (such as the Constant Growth DDM shown below) essentially determine the intrinsic value (present value) of future dividends.
ABC has 1 million shares of common stock outstanding. The current share price is $50 per share. The most recent dividend was $6 and the growth rate is -2%. ABC
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