An investor likes the potential of a start-up company. He is considering buying part of the...

An investor likes the potential of a start-up company. He is considering buying part of the firm. For his investment, he won’t receive any payments for the first 5.00 years as the company launches. Beginning with the end of year 6.00, he expects to receive $500,000.00 per year for 10.00 years. If he wants a 20.00% return on this investment, what is he willing to pay today for the opportunity?

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

An investor is considering the following opportunity: He will put capital into a start-up company today....

An investor is considering the following opportunity: He will put capital into a start-up company today. He will not receive any cash flows from the investment until end of the 5th year. At that point, he will receive 10.00 years of $14,100.00 per year. If his discount rate on this investment is 18.00%, what is the value of this opportunity today? A family takes out a mortgage for $278,000.00 from the local bank. The loan is for 30 years of...

A real estate investor likes to “flip” houses. That is, he likes to buy a house...

A real estate investor likes to “flip” houses. That is, he likes to buy a house at a low price and then “flip” or sell the house for a higher price. The investor is looking at a foreclosed house that will cost $242,779.00 today. He will invest an additional $41,563.00 in the first year of owning the house to upgrade its features. He then believes he can sell the house for $405,977.00 at the end of the second year. What...

A real estate investor likes to “flip” houses. That is, he likes to buy a house...

A real estate investor likes to “flip” houses. That is, he likes to buy a house at a low price and then “flip” or sell the house for a higher price. The investor is looking at a foreclosed house that will cost $241,374.00 today. He will invest an additional $42,764.00 in the first year of owning the house to upgrade its features. He then believes he can sell the house for $420,169.00 at the end of the second year. What...

An investor offers you $706,274 in exchange for shares of your start-up company. The investor demands...

An investor offers you $706,274 in exchange for shares of your start-up company. The investor demands an annual rate of return of 64%, and expect that your IPO will be in 6 years. At that time you expect your firm to have annual income of around $1,812,034 dollars. A similar firm was recently acquired for $18,052,305 dollars. At the time of acquisition, their income was $1,836,685 million dollars per year. What percentage of your equity should you give to the...

An investor offers you $853,457 in exchange for shares of your start-up company. The investor demands...

An investor offers you $853,457 in exchange for shares of your start-up company. The investor demands an annual rate of return of 69%, and expect that your IPO will be in 5 years. At that time you expect your firm to have annual income of around $1,898,530 dollars. A similar firm was recently acquired for $18,848,156 dollars. At the time of acquisition, their income was $1,994,670 million dollars per year. What percentage of your equity should you give to the...

X Company currently makes a part and is considering buying it from a company that has...

X Company currently makes a part and is considering buying it from a company that has offered to supply it for $19.69 per unit. This year, per-unit production costs to produce 17,000 units were: Direct materials $8.40 Direct labor 5.80 Overhead 6.90 Total $21.10 $51,000 of the total overhead costs were fixed. $29,580 of the fixed overhead costs are avoidable if X Company buys the part. If the company buys the part, the resources that are used to make it...

X Company currently makes a part and is considering buying it from a company that has...

X Company currently makes a part and is considering buying it from a company that has offered to supply it for $18.54 per unit. This year, per-unit production costs to produce 15,000 units were: Direct materials $8.30 Direct labor 5.20 Overhead 6.40 Total $19.90 $52,500 of the total overhead costs were variable. $17,400 of the fixed overhead costs are unavoidable if X Company buys the part. If the company buys the part, the resources that are used to make it...

X Company currently makes a part and is considering buying it from a company that has...

X Company currently makes a part and is considering buying it from a company that has offered to supply it for $18.93 per unit. This year, per-unit production costs to produce 20,000 units were: Direct materials $8.30 Direct labor 5.80 Overhead 5.50 Total $19.60 $44,000 of the total overhead costs were fixed. $25,520 of the fixed overhead costs are avoidable if X Company buys the part. If the company buys the part, the resources that are used to make it...

X Company currently makes a part and is considering buying it from a company that has...

X Company currently makes a part and is considering buying it from a company that has offered to supply it for $20.47 per unit. This year, per-unit production costs to produce 15,000 units were: Direct materials $8.20 Direct labor 6.80 Overhead 5.80 Total $20.80 $30,000 of the total overhead costs were fixed. $13,500 of the fixed overhead costs are unavoidable if X Company buys the part. If the company buys the part, the resources that are used to make it...

X Company currently makes a part and is considering buying it from a company that has...

X Company currently makes a part and is considering buying it from a company that has offered to supply it for $18.19 per unit. This year, per-unit production costs to produce 20,000 units were: Direct materials $8.20 Direct labor 5.90 Overhead 4.50 Total $18.60 $50,000 of the total overhead costs were variable. $16,000 of the fixed overhead costs are unavoidable if X Company buys the part. If the company buys the part, the resources that are used to make it...

Subjects