Small business-consulting firm

Assignment Help Finance Basics
Reference no: EM133061866

You worked as a partner for a small business-consulting firm and you want to leave the company because of a better career option. Based on the partnership agreement, when a partner leaves the firm, his or her ownership in the firm is cashed out with an immediate payment worth 3 percent of last year's revenue. The firm generated a sales revenue of $5 million during last year. However, other partners would rather not have to pay out this big cash flow to you this year because they need the money to expand their business in the next two years. According to the estimation, they can generate a revenue of $7.5 million in two years. Therefore, they provide you with two payment choices: one is to take 3 percent of last year's revenue now, and another option is to take 2.5 percent of the expected revenue two years later. If the discount rate that applies to you is 10 percent, which payment option is optimal?

Reference no: EM133061866

Questions Cloud

Equity sources of funding for capital and debt sources : What are the differences between Equity Sources of funding for Capital and Debt Sources?
What are the key elements that you believe : What are the key elements that you believe make Design Thinking, Lean UX and Agile so compatible for developing products that meet customer needs
What is the bond current yield : 1) Consider a $25,000 par value bond with a 7 percent, semi-annual coupon and 10 years remaining until maturity.
How much is the contract worth now : Suppose you were a writer and you just signed a contract with a publisher in which you will receive the following payments for the next five years: $10,000, $20
Small business-consulting firm : You worked as a partner for a small business-consulting firm and you want to leave the company because of a better career option. Based on the partnership agree
Compare uk design council double diamond and stanford model : The UK Design Council Double Diamond is a 4 phase model for design thinking innovation while the Stanford d.school model has 5 phases
What is the firm dividend growth rate : Assuming VVI's stock is currently selling for $51, the expected dividend one year from now is $1.50. What is the firm's dividend growth rate
Find the annualized rate of return on the loan : A major international bank makes a $7.5 million 270-day pure discount loan at LIBOR of 7.9%. At the same time, however, it exercises an interest rate put that h
Evaluate performance of an equity fund : Discuss how you would use CAPM to evaluate performance of an equity fund given information on its "alpha" and "beta". Draw a graph to illustrate your answer.

Reviews

Write a Review

Finance Basics Questions & Answers

  Expected rate of return on the market portfolio

The risk free rate is 3% and the and the expected rate of return on the market portfolio is 8%.

  Describe the same disaster event

Compare the three articles to determine which provides the most useful information to the reader in terms of immediate response and recovery information.

  Capital value as at 1 january for year 2

An investment on 1st January year 1 has expected receipts of on 31st December of each year of €900 for 4 years.

  Sale once you pay off the? mortgage

how much cash will you have from the sale once you pay off the? mortgage? ?(Note: Be careful not to round any intermediate steps to fewer than six

  Discuss the benefits and disadvantages of the policy

Research, individually, a corporate social responsibility (CSR) policy at a large organization. Prepare to discuss the benefits and disadvantages of the policy with your team.

  Solicitation for the fielding of a new system

Please help with the following: You are preparing a firm fixed price (FFP) solicitation for the fielding of a new system.

  Calculate the size of the two equal payments

She is required to settle the amount with two equal payments, one immediately and the other in 6 months. Calculate the size of the two equal payments, using 6 months as the focal date. Round to the nearest cent.

  Describe the different accounting ledgers used by construct

Describe the different accounting ledgers used by construction companies and explain their purpose.

  What is the ocf for this project

The project is estimated to generate $2,650,000 in annual sales, with costs of $840,000. If the tax rate is 35%, what is the OCF for this project?

  Identify the current price earnings ratios for three

valuation of a companys sharesidentify the current price earnings ratios for three companies traded on the london stock

  Determining the real options theory

Capital budgeting is based on business anticipations and the impact those anticipations will have on fixed asset requirements. Black Sholes offers a theoretical model in Real Options Theory that allows management to quantify this relationship.

  Determine the strike price of the two options

Determine the strike price of the two options assuming it is identical for both.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd