Present value of the cyber security company

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Alex wants to determine the present value of his investment. The cyber security company is currently in the development stage but hopes to "begin" operations early next year. After-tax cash flows during the next five years are expected to be as follows: Year 1 = -$1.5 million, Year 2 = 0, Year 3 = 0, Year 4 = $2.5 million, and Year 5 = $3 million. Cash inflows are expected at 5% annual rate thereafter. The discount rate is assumed at 35% for year 1-5 and 20% after year 5.

1) Determine the STY terminal or horizon value at the end of five years.= ?

2) What is the present value of the cyber security company?

3) What percent ownership interest should Alex be willing to give to a venture investor, Jose, for her $1,000,000 investment?

Reference no: EM131782062

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