Question 4 a) Explain the differences between recourse and non-recourse lending and outline when each could be used in project finance. b) Lakemba Limited (LKL) has developed a new type of solar photovoltaic cells for electricity generation, which is compact and very competitively priced but also has a long-expected useful life. Lakemba is a relatively new company and they are seeking funds to commercialise production of the new solar cells. They have approached venture capital company Bankstown Hill Ventures for funding. Bankstown Hill Ventures (BHV) is considering investing into Lakemba Ltd and is assessing their potential investment. BHV have collected the following information: Amount of investment: $9 million; . Lakemba Ltd should become profitable in three years, so term of the investment is three years; The expected profit at the end of three years is $2.2 million; . Lakemba currently has 1 million ordinary shares on issue and outstanding, all shares are owned by founders; For a three-year investment like this, Bankstown Hill Capital requires a return of 30 percent per annum, compounding annually; There is a similar company to Lakemba Ltd, Birrong Ltd (BRL). BRL generated a profit of $2,800,000 last year. BRL's market value of equity is $55 million. . Neither Lakemba Ltd or Birrong Lid have any debt outstanding Required: (i) Use the VC method to determine the value of Lakemba Ltd at the end of three years. (3 marks) (ii) Calculate: 1. The present value of Lakemba Ltd ii. The pre-money value of Lakemba Ltd iii. The post-money value of Lakemba Ltd (2+2+2-6 marks) (iii) The percentage of Lakemba Ltd that Bankstown Hill Ventures will own for the $9 million investment.