1. Chris Blazo, owner of the C&C Fishieries, wants to determine the present value of his...

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1. Chris Blazo, owner of the C&C Fishieries, wants to determine the present value of his investment. The company is currently in the development stage but hopes to "begin" operations early next year. After-tax cash flows during the next five years are expected to be as follows: Year 1 = 0, Year 2 = 0, Year 3 = 0, Year 4 = $500,000, and Year 5 = $1.75 million. Cash inflows are expected to be $3.00 million in Year 6 and are expected to grow at a 5 percent annual rate thereafter. Target discount rates by life cycle stage are development stage, 40 percent; startup stage, 35 percent; survival stage, 30 percent; and early rapid-growth stage, 25 percent. As ventures move from their late rapid-growth stages and into their maturity stages, a 15 percent discount rate is often used. A. Determine the venture's terminal or horizon value at the end of five years. B. What is the present value of the venture? c. What percent of the ownership interest should Chris be willing to give to an investor, Mr. Nissan, for his $300,000 investment? 2. Texas Roadhouse Steak Co. is considering getting into operation. The company needs to purchase a land and construct a new outlet. The land, which would be bought immediately (at t = 0), has a cost of $100,000 and the outlet, which would be erected at the end of the first year (t = 1), would cost $150,000. It is estimated that the company's after- tax cash flow will be $80,000 starting at the end of the second year, and that this incremental flow would increase at a 15 percent rate annually over the next 8 years. What is the approximate payback period? 3. Link3 Technologies is faced with two independent investment opportunities. The company uses the discounted payback method to assess potential projects and utilizes a discount rate of 12 percent. The cash flows for the two projects are: Year Project A Project B 0 2 -$100,000-$75,000 1 50,000 50,000 50,000 75,000 3 55,000 4 20,000 0 2 40,000 Which investment project should the company go for? 1. Chris Blazo, owner of the C&C Fishieries, wants to determine the present value of his investment. The company is currently in the development stage but hopes to "begin" operations early next year. After-tax cash flows during the next five years are expected to be as follows: Year 1 = 0, Year 2 = 0, Year 3 = 0, Year 4 = $500,000, and Year 5 = $1.75 million. Cash inflows are expected to be $3.00 million in Year 6 and are expected to grow at a 5 percent annual rate thereafter. Target discount rates by life cycle stage are development stage, 40 percent; startup stage, 35 percent; survival stage, 30 percent; and early rapid-growth stage, 25 percent. As ventures move from their late rapid-growth stages and into their maturity stages, a 15 percent discount rate is often used. A. Determine the venture's terminal or horizon value at the end of five years. B. What is the present value of the venture? c. What percent of the ownership interest should Chris be willing to give to an investor, Mr. Nissan, for his $300,000 investment? 2. Texas Roadhouse Steak Co. is considering getting into operation. The company needs to purchase a land and construct a new outlet. The land, which would be bought immediately (at t = 0), has a cost of $100,000 and the outlet, which would be erected at the end of the first year (t = 1), would cost $150,000. It is estimated that the company's after- tax cash flow will be $80,000 starting at the end of the second year, and that this incremental flow would increase at a 15 percent rate annually over the next 8 years. What is the approximate payback period? 3. Link3 Technologies is faced with two independent investment opportunities. The company uses the discounted payback method to assess potential projects and utilizes a discount rate of 12 percent. The cash flows for the two projects are: Year Project A Project B 0 2 -$100,000-$75,000 1 50,000 50,000 50,000 75,000 3 55,000 4 20,000 0 2 40,000 Which investment project should the company go for?

Answer rating: 100% (QA)

a For NECE and KBC company to consider an interest rate swap they should have different preferences for borrowing at fixed or floating rates In this c... View the full answer