Assume the forecasted cash flows presented in Problem 2 for the TecOne Corporation venture also hold for

Question:

Assume the forecasted cash flows presented in Problem 2 for the TecOne venture also hold for the LowTec venture. However, investors in LowTec have an expected rate of return of 30 percent on their investment until Year 6 when the rate of return is expected to drop to 18 percent. The growth rate for cash flows after Year 6 is expected to be 7 percent.
A. Determine the present value for the LowTec venture.
B. If an outside investor offers to invest $1.5 million today, what percentage ownership in LowTec should be given to the new investor?

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