You are thinking of buying a startup cosmetics company. The cost to purchase the startup is$3,500,000. You expect to be able to sell half of your ownership stake for $2,250,000 three yearsfrom now (after 3 years). After you bring in additional investors, you think that the buzz for thecompany will increase so that you can sell the other half of your ownership stake for $2,500,000four years from now (after 4 years). Your relevant interest rate is 8%. What is the net present value(NPV) of this investment?$123,697.17$382,956.43$413,592.95$726,680.38$114,534.42

The Net Present Value (NPV) is a financial metric that is widely used in capital budgeting and…

Answered: You are thinking of buying a startup…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

You are planning to manufacture a new cordless induction food processor. As this is new technology, it will cost you $4 million to develop and you plan to manufacture for three years (3Y straight line depreciation). Due to the rapidly changing nature of induction technology you do not wish to plan any more than three years ahead. Competition is fierce and you have estimated your annual expenses and sales etc as per the following with estimates for changes in good or bad scenarios. a. Market size b. Market share Unit Price 70,000 ± 7% 0.30 ± 10% $500 ± 5% c. d. Variable c.p.u. 28% e. Fixed costs f. Taxes Your cost of capital is 6%. $270 ± 12% $400,000 ± 13% Create a table of estimated and pessimistic values for each element. What is the three-year NPV of the project with all values pessimistic? Do you think that this should go ahead and why?
Sally is thinking about starting a new business. The company would require $700,000 of assets, financed with 40% debt and 60% equity. She will go forward only if she thinks the firm can provide an ROE of at least 15.9%. Operating at a profit margin of 12%, what is the minimum amount of sales that must be expected to support starting the business? Your answer should be between 472000 and 595000, rounded to even dollars (although decimal) places are okay), with no special characters.
As the owner of a small startup, you are faced with a fewmajor financial decisions concerning the expansion orpotential sale of your business. Based on the followingdetails, you must calculate the Present Value, Future Value,Loan Amortization and NPV/Firm Value.Present Value:You are required to have $250,000 seven years from nowfor new manufacturing equipment. Not sure how much youwill need to save as a lump-sum today, you calculate thepresent value (for the beginning of the period) with thefollowing additional details. Interest Rate of 6% with nofuture deposits.Future Value:To take advantage of the rising interest rate environmentthrough the actions of the Federal Reserve, you decide toinvest in U.S. Treasury Bills maturing in one year. Curious toknow what your investment will be worth one year fromtoday, you calculate the future value (for the end of theperiod) based on the following details. Number of period isone, interest rate is 5.25% (compounded monthly), no futuredeposits,…
Mansuk
Coming Up Roses has grown into a very successful business and you have just received an offer from someone to purchase the business from you for $1.2 million. The potential buyer has offered you $400,000 at the time of sale, $600,000 at the end of the growing season, in 6 months, and the balance, $200,000 in 1.5 years from now. What is the present value of this offer if you could invest at 6% compounding monthly?
The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer's price is $70,000, and it falls into the MACRS 3-year class. Purchase of the computer would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $30,000 per year but would also increase operating costs by $15,000 per year. The computer is expected to be used for 3 years and then be sold for $25,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent.What is the net cash flow at t = 0? Cash outflow should be in negative number, e.g., -33,000, and do not include the $ sign.
You are looking to invest into Mona's Mayhem - a punk rock entertainment empire. Mona's Mayhem is expected to earn $8.98 per share next year and earnings are expected to grow by 1.7% forever. Mona's Mayhem reinvests 70% of its earnings each year. You would like a rate of return on your investment of 11.3% per year. How much are you willing to pay per share for Mona's Mayhem? (please round your answer to the nearest penny)
Nikul
second screenshot shows the options to fill in the blanks

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS