[c]Plot Ten Corporation is about to begin producing and selling a new product. The finance officer has
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[c]Plot Ten Corporation is about to begin producing and selling a new product. The finance officer has come up with the following cash flows:
YEAR ANDCASH FLOW (SH)
- - 50,000
- - 20,000
- 100,000
- 400,000
- 800,000
The investors ofPlot Tenhave 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 perpetuity growth rate for cash flows after Year 6 is expected to be 7 percent.
Required:
(i)Determine the present value for the Plot Ten Venture.
(ii)If an outsider investor offers to invest Sh 1.5 million today, what percentage ownership in Plot Ten should be given to the new investor?
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