The consultancy project, which identified the private equity investor, cost Lisa AUD 6.500. For a proper presentation, along with an audit of the company, another AU 17.500 will have to be spent. The deal would involve a 60% stake in the company.
Lisa wants to calculate the cash flow that the company needs to generate in order for the private equity investor to be interested. After all, if the company cannot generate that cash, further spending on this project would be a waste.
The question: Calculate what the cashflow the company has to generate from next year for this to work, with the following assumptions: The cashflow is perpetual, and grows at a 2% rate. The discount rate is 8.5%. The cashflow must be such that 60% of it is worth 1 million AUD and whatever other costs are attributable to the decision.

Answer rating: 100% (QA)

To calculate the cash flow that the company needs to generate in order to make the investment attrac... View the full answer