Estimate the present value of the venture at the end of year

Assignment Help Financial Management
Reference no: EM131314028

A venture capitalist wants to estimate the value of a new venture. The venture is not expected to produce net income or earnings until the end of year 5 when the net income is estimated at $1,600,000. A publicly-traded competitor or comparable firm has current earnings of $1,000,000 and a market capitalization value of $10,000,000. Estimate the value of the new venture at the end of year 5. Estimate the present value of the venture at the end of year 0 if the venture capitalist wants a 40 percent annual rate of return on the investment.

Reference no: EM131314028

Questions Cloud

Calculate the average rate of return for each year : Caswell Enterprises had the following end-of-year stock prices over the last five years and paid no dividends.  Calculate the average rate of return for each year from the above information. What is the arithmetic average rate of return earned by inv..
Calculate expected rate of return : You are considering investing in a project with the following possible outcomes: Calculate the expected rate of return
Net present value calculation : (Net present value calculation) Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of $4,000,000 and would generate annual net cash inflows of $900,000 per yea..
What is your dividend yield-what is your capital gain yield : Growth Inc. just paid a $1 dividend. Dividends are expected to grow 75% per year, for the next two years, after which they are expected to grow by 5% indefinitely. a. If investors require a 15% return, what is the price of Growth Inc.'s stock today? ..
Estimate the present value of the venture at the end of year : A venture capitalist wants to estimate the value of a new venture. The venture is not expected to produce net income or earnings until the end of year 5 when the net income is estimated at $1,600,000. Estimate the present value of the venture at the ..
What is the conversion value of share of the preferred stock : A share of a venture s preferred stock is convertible into 1.5 shares of its common stock. The dividend on the preferred stock is $.50 per share. If the firm s common stock is currently trading at $9.75, what is the conversion value of a share of the..
Rate of return you earned on plaxo stock is what percent : The common stock of Plaxo Enterprises had a market price of $10.44 on the day you purchased it just one year ago. During the past year, the stock paid a dividend of $1.43 and closed at a price of $11.66. What rate of return did you earn on your inves..
Margo would like to create portfolio of financial stocks : Margo would like to create a portfolio of financial stocks. The goal is to maximize expected return and minimize risk (standard deviation of the portfolio’s return). Should the stocks return in the portfolio highly correlated or negatively correlated..
Determine the initial investment and payback period : XYZ Co. is considering the purchase of a new machine. The machine will cost $250,000 and requires installation costs of $25,000. The existing machine can be sold currently for $25,070. It was purchased three years ago for $83,000 and depreciated usin..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Accumulate money for his down payment

John plans to buy a vacation home in 8 years from now and wants to have saved $57965 for a down payment. how much money should he place today in a saving account that earns 4.63 % per year (compound daily) to accumulate money for his down payment?

  Install the equipment necessary to start production

Dahlia Enterprises needs someone to supply it with 120,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost you $870,000 to install the equipment n..

  What is the bonds yield to call today if investors expect

A bond is sold for its face value of $1,000 with a 25-year maturity, a 9% coupon, and interest paid semiannually. The bond is callable 5 years from issuance at an 11% premium over face value. What is the bond's yield to call today if investors expect..

  Find the net present value for a project that would yield

A project proposal stated that it would provide at least $20,000 in annual returns for the next 3 years but requires an initial investment of $50,000. Will its approval be worthwhile if the cost of capital is 8%? Find the net present value for a proj..

  Improve estimate of the price of the american option

Use the DerivaGem software with four 3-month time steps to estimate the value of the option. - Display the tree and verify that the option prices at the final and penultimate nodes are correct.

  Dividends are expected to grow at constant rate

The Jackson–Timberlake Wardrobe Co. just paid a dividend of $1.85 per share on its stock. The dividends are expected to grow at a constant rate of 4 percent per year indefinitely. Investors require a return of 12 percent on the company's stock. What ..

  Considering investing in project that increases annual costs

You are considering investing in a project that increases annual costs by 25,000 per year over the projects 5 year life. The project has an initial cost of 500,000 and will be depreciated straight line over 5 years to a salvage value of 0. Assume a 3..

  Explain this difference between the market realities

The M&M theory states it does not make any difference from an economist’s view whether a firm raises financing as equity or debt. However floatation costs are more for equity than debt and interest on debt is tax deductible whereas dividends are not...

  Write essay recommending a cash management strategy

Write a 300-word essay recommending a cash management strategy for the company that will minimize the financing cost and increase the cash flows for the company.

  Create a newsletter for current and future employees

Starting a new product or service line that will require new kinds of employees - The current plan is to use savings from reduced marketing and distribution costs for training.

  Most appropriate for an aggressive? investor

An investor is considering purchasing one of the following three stocks. Stock X has a market capitalization of ?$99 ?billion, pays a relatively high dividend with little increase in? earnings, and has a? P/E ratio of 1111. Stock Y has a market capit..

  The loan has a five-year term with monthly payments

You have just purchased a car and taken out a $51,000 loan. The loan has a five-year term with monthly payments of $997.87 and an APR of 6.5%. How much will you pay in interest, and how much will you pay in principal during the first month? What is y..

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