Describe the process of valuing the entrepreneur’s ownership interest in a two-stage investment. Refer to Tables 13.10 and 13.13.

Data from table 13.10

Data from table 13.13

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Market potential (thousands of units) Price (dollars) Potential revenue Year D 2 3 5 101.16 $100 $10.116 204.80 435.20 606.92 833.88 $100 $100 $20,480 543.520 $100 560,092 $100 $83.388 Total investment Investment $2.500 $5,000 Cumulative investment $2,500 $2,500 $7,500 $7,500 $7,500 $7,500 Total income Sales revenue $10,116 $20,480 $43.5201 $60,692 $83.388 Cost of sales Gross profi Operating expenses Interest expense $8,092 S16.384 $34,816 $48,553 $66,710 $2.023 $4,096 $8,704 $12.138 $16.678 SI,809 $2,638 $4.482 $5.855 $7,671 572 $479 $1.471 $2.335 $2,753 Interest income 50 SO SO Net profit $214 $1,458 $4,222 $6,283 $9,007 Total cash flow Beginning cash 50 50 50 Operating cash flow 5214 $1.458 $4.222 $6.283 $9,007 NWC required $1,012 $5,182 $11.520 $8,586 $11.348 Free cash (5798) ($3,725) ($7.298) ($2,303) (82,341) Borrowing $798 $3.725 $7,298 $2.303 $2,341 Repay loan Ending free cash Loan balance Total ending value Continuing value Plus: free cash Less: loan balance Value Total investment Investor's first-stage investment Investor's second-stage investment 50 SO 50 SO 50 50 5798 $4,522 $14.123 $16,464 $72,052 SO $15,464 $55,588 $2,000 Entrepreneur's first-stage investment $5,000 $500 Total equity share and return Investor's share in first stage 10.00% Investor's share in second stage 30.00% Investor's total share 37.00% $20,568 Entrepreneur's total share 63.00% $35,020