Some of your colleagues are setting up a company to manufacture sports clothing in expectation that demand will rise in a post Covid 19 world. They have identified a suitable factory, which will cost $50 million to purchase, install equipment and fit out. They expect it will take four years to reach full production.

The colleagues have provided you with rough financial forecasts of the business. It is expected to generate after tax income of $5 million in the first year of operation, and then rise at 3% each year. You have $75,000 to invest in this opportunity. Your alternative is to invest in shares with an expected return of 8% PA.

What would be the minimum proportion of the company that you would expect to receive for your $75,000? Carefully explain your answer and include financial justificatio

 

Answer rating: 100% (QA)

The minimum proportion of the company that I would expect to receive for my 75000 is 10 I wo... View the full answer