Reference no: EM132249859

Assignment

Your task is to build the three financial statements (P&L, cash flow statement, balance sheet) in evolution for 5 years, yearly granularity - in Excel.

You should also answer the following questions:

Optimum price.

At what monthly subscription price will you reach highest value of the business at the end of Y5? For simplicity assume that "value" is the net book value of the assets at the end of Y5.

For simplicity use whole dollar values for the monthly price. What is the net book value of the assets at the end of Y5 at this optimum price? What is the net book value of the assets if the price is below or above the optimum (+/- 3 data points)?

Illustrate through meaningful visualization the relationship between price and the NBV of the business' assets at end of Y5.

Annual return equivalent.

Let's assume you have selected the best price to maximize the value of the business and let's assume you can sell the business at the end of Y5.

Now your friends are thinking "we can invest the 550 K USD in the stock market at 10% annual return. Keeping the money invested, five years down the road will get a return without the risk of a startup and all the operational hassle". So they want to know what is the annual return equivalent of the business and if it is above 10%.

(Here we use "equivalent" because the annual return of a start-up will not be the same each year, but if we assume the same annual rate of return each year, what % annual return rate will generate the same end value of the initial investment 5 years later? Do not forget compounding, let's say annually).

If you assume that the average annual investment return over the next 5 years is expected to be 7% (for equivalent risk), what is the incremental dollar amount of the start-up's assets at the end of the 5-year period?

Attachment:- Start-up.rar