You are an inventor with a great business idea but no money. You have approached a venture capitalist (VC), asking for a $150 million investment in your company. You explaini reinvest all of the project's earnings in Years 1 and 2, and you expect that these additional investments will also earn a 40% annual rate of return forever. After Year 2, you plan constant forever from Year 3 onward. The appropriate discount rate for your business is 30%. If the capital market were perfectly efficient, what ownership share in the compan percentage VC should require if market is efficient? O 39.86% O 47.83% O 31.89% O 49.82% 64.67%
You are an inventor with a great business idea but no money. You have approached a venture capitalist (VC), asking for a $150 million investment in your company. You explaini reinvest all of the project's earnings in Years 1 and 2, and you expect that these additional investments will also earn a 40% annual rate of return forever. After Year 2, you plan constant forever from Year 3 onward. The appropriate discount rate for your business is 30%. If the capital market were perfectly efficient, what ownership share in the compan percentage VC should require if market is efficient? O 39.86% O 47.83% O 31.89% O 49.82% 64.67%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:You are an inventor with a great business idea but no money. You have approached a venture capitalist (VC), asking for a $150 million investment in your company. You explain
reinvest all of the project's earnings in Years 1 and 2, and you expect that these additional investments will also earn a 40% annual rate of return forever. After Year 2, you plan
constant forever from Year 3 onward. The appropriate discount rate for your business is 30%. If the capital market were perfectly efficient, what ownership share in the compar
percentage VC should require if market is efficient?
39.86%
O 47.83%
O 31.89%
O 49.82%
O 64.67%
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