Question
In: Finance
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 monthly payments at a 4.92% APR (monthly compounding). What will the family’s balance be on the mortgage after 10.00 years?
Solutions
jeff jeffy answered 8 months agoRelated Solutions
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?
A ) An entrepreneur invests $40,454.00 into a start-up business today. He expects the business will...
A ) An entrepreneur invests $40,454.00 into a start-up business
today. He expects the business will generate $60,003.00 per year
for 14.00 years, and then it will generate $137,194.00 per year for
the following 16.00 years. Suppose he wants a 9.00% annual return
to run the business. What is the value of this business today if
his forecasts are accurate? (HINT: Discount all cash flows to today
and subtract start-up investment.)
B) A young graduate is planning on saving $600.00...
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...
An investor is considering buying a put option for stock ABC with the following parameters: Exercise...
An investor is considering buying a put option for stock ABC
with the following parameters:
Exercise price of the put option is $170, initial stock price
$165, put option price $8.
A. Define payoff and profit function and provide payoff and
profit formulae for the put option buyer at maturity with respect
to stock price at expiration.
B. Define payoff and profit function and calculate the payoff
and profit for a protective put position at maturity when the stock
price...
An investor is considering buying a put option for stock ABC with the following parameters: Exercise...
An investor is considering buying a put option for stock ABC
with the following parameters:
Exercise price of the put option is $170, initial stock price
$165, put option price $8.
A. Define payoff and profit function and provide payoff and
profit formulae for the put option buyer at maturity with respect
to stock price at expiration.
B. Define payoff and profit function and calculate the payoff
and profit for a protective put position at maturity when the stock
price...
An investor is considering buying a put option for stock ABC with the following parameters: Exercise...
An investor is considering buying a put option for stock ABC
with the following parameters:
Exercise price of the put option is $170, initial stock price
$165, put option price $8.
A. Define payoff and profit function and provide payoff and
profit formulae for the put option buyer at maturity with respect
to stock price at expiration.
B. Define payoff and profit function and calculate the payoff
and profit for a protective put position at maturity when the stock
price...
A new start-up company promises to pay an investor each quarterfor the next two years....
A new start-up company promises to pay an investor each quarter
for the next two years. The company will pay $22,225.00 per quarter
for the first four quarters, and then $25,075.00 per quarter for
the following four quarters. If the investor wants a 8.40% APR
return with quarterly compounding, what is the value of the
investment opportunity today?
Assume you have $10mio in investor capital. Show the growth of this capital since the start...
Assume you have $10mio in investor capital. Show the growth of
this capital since the start of 2018 assuming you were continuously
engaging in a simple arbitrage strategy where you buy the
low-priced asset and sell the high-priced asset. Be sure
incorporate all the real-world frictions that would arise if you
were implementing the arbitrage such as interest rates, storage,
insurance, transportation costs, natural disasters, theft, fraud,
etc.
Formula 1: F0=S0e(r-q)
where r represents the interest rate, q represents the...
A prospective investor is evaluating the share of a company. He is considering three scenarios. Under...
A prospective investor is evaluating the share of a company. He
is considering three scenarios. Under the first scenario the
company will maintain to pay its current dividend per share without
any increase or decrease. Another possibility is that the dividend
will grow at an annual rate of 6% in perpetuity. Yet another
scenario is that the dividend will grow at a high rate of 12% for
the first 3 years; a medium rate of 7% for the next 3...
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