I. Time value of money A. Calculate the below time value of money figures: 1. Calculate the

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Question:

I. Time value of money

A. Calculate the below time value of money figures:

1. Calculate the present value of the business based on the given interest rate and expected revenue over time.

2. Suppose that the company's risk changes based on an internal event. Recalculate the present value of the company.

3. Suppose a potential buyer has offered to buy this company in five years. Based on the present value you calculated earlier, what would be a reasonable amount for which the business should be sold at that time in the future?

B. What are the implications of the risk-based present value change? In other words, what does the change mean for the company and how would you, as a financial manager, interpret it? Be sure to justify your reasoning.

C. Based on the future value of the company you calculated, and keeping in mind the need to effectively balance portfolio risk against return, what recommendation would you make about buying the company as an investment at that price? Be sure to substantiate your reasoning.

Free Cash Flows = Fiscal Year Capital Leases Operating Leases (FY 15) Free Cash Flows: FCF 1- FCF 5 in millions 2015- $113,000 2016 -111,000 2017 -108,000 2018 -101,000 2019 -97,000

1. 6% 2. 8%