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A potential investor is seeking to invest $500,000 in a venture, which currently has 1,000,000 shares held by its founders, and is targeting a 50% return five years from now. The venture is expected to produce half a million dollars in income per year at year 5. It is known that a similar venture recently produced $1,000,000 in income and sold shares to the public for $10,000,000. a. What is the percent ownership of our venture that must be sold in order to provide the venture investor’s target return? b. What is the number of shares that must be issued to the new investor in order for the investor to earn his target return? c. What is the issue price per share? d. What is the pre-money valuation? e. What is the post-money valuation? Make sure you specifically include a section in your submission that clearly states your answer to each question. I will not hunt through your spreadsheets or calculations to find your answers. If possible, please try to include only one document in your submission and please do not use embedded spreadsheets if you use a word document. Please label your assignment using our assignment labeling convention. Each question is worth three points.
Assume a $6,500 investment and the following cash flows for two alternatives. Under the payback method, which of the following would be concluded?
Scott Investors, Inc., is considering the purchase of a $362,000 computer with an economic life of four years. The computer will be fully depreciated over four years using the straight-line method. Calculate the NPV of this project.
Harry Davis is interested in establishing a new division that will focus primarily on developing new Internet-based projects. their capital structure is 10% debt and 90% common equity; their cost of debt is typically 12%; and they have a beta of 1.7...
The risk that mortgages will prepay quicker than investors would like is called (???) risk and is associated with (???) market interest rates. The risk that mortgages will prepay slow than investors would like is called (???) risk and is associated w..
Answer the following questions relative the potential conflict in ranking mutually exclusive capital budgeting opportunities. Give two conditions under which IRR and NPV may provide different rankings of mutually exclusive capital-budgeting projects...
What is the future value of a $810 annuity payment over four years if interest rates are 8 percent?
If you assume that the stock market has a maximum expected loss of -3.2 percent on a daily basis, what is the maximum daily loss for the Quitar Co. stock?
In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period. An individual retirement account, or IRA, earns tax-deferred interest and allows the owner to invest up to ..
The ABC Company has made the following monthly estimates of cash receipts and cash disbursements when preparing cash budgets for the next twelve months. ABC has beginning cash on hand of $20,000 and wants to maintain this minimum cash level throughou..
Draw the profit diagrams at maturity for the following portfolios consisting of options. Clearly label all the important points in the diagrams.
Suppose your firm is considering investing in a project with the cash flows shown below, that the required rate of return on projects of this risk class is 12 percent, and that the maximum allowable payback and discounted payback statistic for the pr..
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 9% of its $100 par value. Preferred stock of this type currently yields 6%. Assume dividends are paid annually. What is the estimated value of Rolen's preferred s..
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