If you were employed by the venture capital fund, based on this information alone, would you recommend that the $1,500,000 investment be made? Yes, the projected return on equity in year three is greater than 30% No, the projected return on equity in year three is less than 30%
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- Fenton, Inc., has established a new strategic plan that calls for new capital investment. The company has a 9.8% required rate of return and an 8.3% cost of capital. Fenton currently has a return of 10% on its other investments. The proposed new investments have equal annual cash inflows expected. Management used a screening procedure of calculating a payback period for potential investments and annual cash flows, and the IRR for the 7 possible investments are displayed in image. Each investment has a 6-year expected useful life and no salvage value. A. Identify which project(s) is/are unacceptable and briefly state the conceptual justification as to why each of your choices is unacceptable. B. Assume Fenton has $330,000 available to spend. Which remaining projects should Fenton invest in and in what order? C. If Fenton was not limited to a spending amount, should they invest in all of the projects given the company is evaluated using return on investment?1. Enter your answers into the box below. Make sure you label your answers using 1, 2,..., etc. XYZ Co has two investments X and Y. Investment X has an initial capital outlay of $500 million, and the investment is expected to generate $1200 million in nine years. Investment Y has an initial capital outlay of $200 million, and the investment is expected to generate $450 million in nine years. Assume XYZ has a cost of capital of 10%. 1. Determine the internal rate of return of Investment X and Investment Y. Should X and Y be taken? 2. Determine the net present value of Investment X and Investment Y. Should X and Y be taken? 2. Enter your answers into the box below. Make sure you label your answers using 1, 2,..., etc. XYZ Co is considering to purchase equipment that has 12 years of life and requires an initial capital outlay of $240 million. The equipment will be depreciated using straight line method to zero book value in 12 years. The salvage value of the equipment is…Lana is thinking about making an iventment in a new venture called BluePearl - after performing an analysis of similar firms, she discovered several other firms (3) with the following Enterprise Value to FCF ratios: Firm 1: 5.9 Firm 2: 7.6 Firm 3: 9.1 The cashflows for BluePearl this year are expected to be $1,300,000. If BluePearl doesn't have any debt or cash currently, and 700,000 shares outstanding - what is the Price Per Share for BluePearl?
- Anjelo Jonathan a financial analyst for Blues Industries, wishes to estimate the rate of return for two similar-risk investments, X and Y. Anjelo’s research indicates that the immediate past returns will serve as reasonable estimates of future returns. A year earlier, investment X had a market value of $20,000; investment Y had a market value of $55,000. During the year, investment X generated cash flow of $1,500 and investment Y generated cash flow of $6,800. The current market values of investments X and Y are $21,000 and $55,000, respectively. A.) Calculate the expected rate of return on investments X using the most recent year’s data. (Format: 11.11%)B.) Calculate the expected rate of return on investments Y using the most recent year’s data. (Format: 11.11%)C.) Assuming that the two investments are equally risky, which one should Anjelo recommend? (Investment X or Investment Y)Based on Baker's earnings history over the past 10 years across a variety of projects, which have covered various states of the economy, the venture capital execs want Baker to estimate their overall returns. Given the following estimates of economy over the next several years, determine Baker's expected rate of return. State of the Economy Current Probability of State of the EconomyRate of Return if State OccursBoom15%21.0%Normal50%13.0%Recession35%-18.0%Using the life cycle approach to financing, create a financial plan for a startup company that requires $1,000,000 in funding to launch its operations. Assume that the company will require additional funding of $ 500,000 in two years and $1,000,000 in five years to support its growth. Assume an interest rate of 8% on debt financing, the debt financing for each year will have a debt service payment of $20,000 per year. HINT: the life cycle lasts 5 years. Year
- Part A We Are Life Limited (WALL) has done it again by creating a vaccine for the novel corona virus. WALL is expected to pay a divideend of $2.45 next year after which dividends should enjoy growth of 15% for 2 years. Dividend growth is then expected to fall to 7% for 1 year before settling at a constant growth of 4% for the foreseeable future. The cost of capital is 24%. i)Calcuate WALL's share price today (P0). ii)Calculate the expected share price three years from today (P3). ii) Calculate the dividend yield for year 4. PART B Cohen and Company Limited (CAC) has three preferred stocks on the market, each with a par value of $90. The stocks has dividends and yield as presented in the table below. Name Dividends yield Series X 8.0% 10.5% Series Y 7.2% 9.8% Series 2 6.5% 11.1%A firm's financial managers are evaluating two potential investments with a cost of $10,000 each. They forecast returns of $3,000 per year for 5 years for Investment A and $4,000 per year for 5 years for Investment B. The returns are more uncertain for B than for A. Which of the following is true? Investment A is better than B according to shareholder wealth maximization criterion. Investment B is better than A according to shareholder wealth maximization criterion. Investment A is better than B according to the profit maximization criterion. Investment B is better than A according to the profit maximization criterion.Two alternative start-up FinTech projects were being contemplated for financing by a venture capitalist to determine which one is more viable, based on cost and returns. Table 4.1 below shows a five-year schedule for the two projects: Table 4.1 Project Start of Project End of 1st Year End of 2nd Year End of 3rd Year End of 4th Year End of 5th Year BlockChain GoPay ($230,000) ($32,000) $660,000 $96,000 $106,000 $119,000 DLT CloudPay ($276,000) $20,000 $65,000 $96,000 $102,000 $118,000 If you were the Project Manager on the Venture Capitalist team, using the Net Present Value (NPV) method, which project would you recommend be financed based strictly on the schedule shown above and an interest rate of 7.5%? Use a Microsoft Excel, or any other method to deduce/calculate the Internal Rate of Return (IRR) for both projects. Explain how you would advise the Bank which project to finance using the result from the IRR method?
- Assume your organization wishes to make a Php 200,000 investment with a private equity firm in 2021. Taking into account all of the risks, the current discount rate is 12%, and the revenue stream/dividends are as follows: 2022 50002023 60002024 70002025 80002026 90002027 100002028 11000 Determine the following:a. NPV for the period 2022 through 2028;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.Assume your organization wishes to make a Php 200,000 investment with a private equity firm in 2021. Taking into account all of the risks, the current discount rate is 12%, and the revenue stream/dividends are as follows: 2022 50002023 60002024 70002025 80002026 90002027 100002028 11000 Determine the following: DO IT IN EXCELa. NPV for the period 2022 through 2028;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.EX_1. A venture capitalist is considering investing in several projects. You have researched several possibilities for her and come up with the following cash flow estimates. Which investment should you recommend for the venture capitalist to choose? First-Year Growth Cost of Сaptal Initial Project Investment Cash Flow Rate Dating App $250,000 $5,000 4% 7% Green $350,000 $75,000 4% 8% Energy Water $400,000 $120,000 5% 8% Purification "Smart" Clothes $500,000 $125,000 8% 12%