Question: please solve below discounted cash flow problem 3 ) Suppose you were offered a private deal to buy a 2 0 % stake in a

please solve below discounted cash flow problem
3)Suppose you were offered a private deal to buy a 20% stake in a local business that has been around for decades, and you know the owner well.
It currently produces $500,000 per year in free cash flows, so this investment into a 20% stake will likely give you $100,000 per year incash, and will likely grow at a 3% rate per year.
So if you invest today in 1 year you will bring home 103,000 and 3% more each consecutive year for 4 more years
If you would like to Receive 15% on all investments, what would you pay today for this investment to make It worthwhile for you?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

Question: What as the average weekly safety inventory level of refined sugar from the beginning January 2022 to the end of July 2022? A. 512,465.9691 metric tons per week B. 316,002.1474 metric tons...

Q:

Hi, I have areport due in nine hours. I need to find the following list of things on Amazon.com....

Q:

Hi there I need help answering ASSIGNMENT 1 ONLY by Friday afternoon. I have attached the study pack to help answer the question. Thanks! FIN4802 ASSIGNMENTS ASSIGNMENT 01 Due date: 13 May 2016...

Q:

Discounted cash flow Real Case Suppose you were offered a private deal to buy a 20% stake in a local business that has been around for decades, and you know the owner well. The business has been...

Q:

questions 1-5. template included at the bottom. please help! Add-ins Media Crossroads: Whick wash the best wish? Ron Christian and his wife, y established a carwash, Croods 20 acres of worthless...

Q:

help with project template included to fill out for project 6 2 3 4 Revenue per Carwash (Per carwash) 5 Variable Costs (per carwash): z Utilities (Elec/gas/water) 8 Detergents/Chemicals 9 Maintenance...

Q:

please summarize Using Discounted Cash Flow Analysis to Make Investment Decisions LEARNING OBJECTIVES After studying this chapter, you should be able to: L01 Identify the cash flows properly...

Q:

Paul Dietrich, a seventh-generation Canadian farmer, had successfully grown a sizable field crop business, Paul V. Dietrich Farms Ltd. (Dietrich Farms), in Southwestern Ontario. It was November 2020...

Q:

The Adora and Jorge Tun Case A CASH FLOW AND EDUCATION PLANNING CASE Adora and Jorge were married seven years ago when Jorge was thirty-five years old. He met Adora, who was also thirty-five years of...

Q:

Please answer these questions for the course BUSINESS FINANCE 1: 1. Present Value and Multiple Cash Flowe. Ancelet Co. has identified an investment project with the following cash flows. If the...

Q:

What are the limitations on the deductibility of capital losses by individuals? How do the limitations compare with those for corporations?

Q:

A study was conducted to investigate the effectiveness of hypnotism in reducing pain. Results for randomly selected subjects are given below. The measurements are in centimetres on a pain scale. At...

Q:

If you convert the point ( 2 , / 3 ) from polar cartesian coordinates, then what is the x - coordinate of the point?

Q:

Corporation is a diversified U.S. firm that has ownership stakes in two other U.S. corporations. Specifically, DMM Corporation owns 60% of the outstanding stock of Tax Shelter.com and 10% of the...

Q:

Following graduation, you meet Mr. Big at a country club. Mr. Big is a venture capitalist who has a sizable stock portfolio concentrated in a single firm, Blue Hat. After several weeks of golfing...

Q:

A 70 year old recently retired engineer is discussing with you, over coffee, whether to gift $ 500,000 to-day to his only $500,000 today to his only daughter or invest the $ 500,000 and bequeath the...

Q:

Suppose your parents founded a wildly successful business in which they still own 90% of the outstanding stock, which is the source of most of their wealth. The basis in their stock is close to zero....

Q:

Brad, Scott, and Jake each contribute property to form BSJ Corporation. Brad contributes a building with a fair market value of $450,000 and a basis of $100,000 and receives 45% of the stock of BSJ....

Q:

Determine if the overhead allocated to the product relates to a single plantwide overhead rate method, multiple production department factory overhead rate method, or activity-based costing...

Q:

Rodehorst (A-28) conducted a prospective study of 212 rural elementary school teachers. The main outcome variable was the teachers intent to manage children demonstrating symptoms of asthma in their...

Q:

The goal of a study by Gyurcsik et al. (A-27) was to examine the usefulness of aquatic exerciserelated goals, task self-efficacy, and scheduling self-efficacy for predicting aquatic exercise...

Q:

Refer to the weight loss data on 588 cancer patients and 600 healthy controls (WGTLOSS). Weight loss among cancer patients is a well-known phenomenon. Of interest to clinicians is the role played in...