Question: undefined Question 4 (Total 15 points) Mr. Johnny Goodwill is a South African investor and he is considering investing in a Greek shipping company and
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Question 4 (Total 15 points) Mr. Johnny Goodwill is a South African investor and he is considering investing in a Greek shipping company and wants to estimate the value of it. The company is expected to generate cash inflows of 4 million per year at the end of year one, two, three and four and 17.5 million at the end of year 5. Based on expectation and research Mr. Johnny Goodwill knows that he must earn 10% on low risk assets, 15% on average risk assets and 20% on high risk assets. Question 4) (15 points in total. 5 points per risk profile): Determine what is the most Mr. Johnny Goodwill should pay for this shipping company if it is classified as (1) low risk, (2) average risk, and (3) high risk. Please show your calculations in the box below: Answer to question 4)
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