Reference no: EM131124261
Refer to the Frothy Slope microbrewery example at the beginning of this chapter.
A. How does the $500,000 piece of the terminal value relate to the future value of the $100,000? That is, the brewpub investor was looking for a 40 percent return. The five-year future value of $100,000 growing at 40 percent is 100,000 × (1.4)5 = $537,824, slightly more than $500,000. Does this mean the investor is not really expected to make 40 percent on the $100,000, even though we used that discount rate to arrive at the initial $5,856,935 valuation? (Hint: What about explicit forecast period flows?)
B. Returning to the brewpub spreadsheet with all flows included, how much more of the venture's ownership of surplus cash flows would have to be sold for the $100,000 if the investor expected to make 70 percent (given Jim's utopian vision of his future)?
C. What percentage of the brewpub's present value is contained in the present value of the terminal value (the venture's reversion value)?
D. How much ownership of the brewpub cash flows would need to be sold to an investor demanding 40 percent but agreeing that the mature brewpub venture would terminally grow at a rate of 8 percent with a risk profile requiring a discount rate of 16 percent?
What if the terminal growth rate were 10 percent and the discount rate 18 percent?
|
Describe the process for estimating the percentage of equity
: Describe the process for estimating the percentage of equity ownership that must be given up by the founder when a new equity investment is needed.
|
|
Determine the annual increases in required net wc
: Project SoftTec's income statement for 2015. Determine the annual increases in required net working capital and capital expenditures .
|
|
Project the financial statements for the next four years
: Project the financial statements for the next four years (2011-2014). Calculate the valuation cash flow for each year. Determine Biometrix's equity value at the end of 2010.
|
|
Determine the dollar amount of equity valuation cash flow
: Assume that the cash account includes only required cash. Determine the dollar amount of equity valuation cash flow for 2011. B. Now assume that Global Products' required cash is set at 3 percent of sales. Any additional cash would be surplus cash. R..
|
|
How much ownership of the brewpub cash flows
: Returning to the brewpub spreadsheet with all flows included, how much more of the venture's ownership of surplus cash flows would have to be sold for the $100,000 if the investor expected to make 70 percent? What percentage of the brewpub's present ..
|
|
Determine the aspen restaurant''s terminal value
: Determine the Aspen Restaurant's terminal or horizon value at the end of five years, assuming the venture will be entering its maturity stage. What is the present value of the Aspen Restaurant, assuming that it is a development-stage venture?
|
|
Determine the present value for the lowtec venture
: The perpetuity growth rate for cash flows after Year 6 is expected to be 7 percent. A. Determine the present value for the LowTec venture. B. If an outside investor offers to invest $1.5 million today, what percentage ownership in LowTec should be gi..
|
|
Draw patrick budget constraint and optimal consumption
: Problem 1: Patrick chooses to use his time ‘free-time': (a) working out or (b) reading. Patrick currently has 20 hours a week to allocate to these two activities. It takes Patrick 1.5 hour to work out and .5 hours to read. Patrick enjoys both activit..
|
|
Assume annual cash flows are expected to remain
: Assume annual cash flows are expected to remain at the $800,000 level after Year 5 (i.e., Year 6 and thereafter). If TecOne investors want a 40 percent rate of return on their investment, calculate the venture's present value.
|