You are considering investing in a start up company The founder asked you for $230,000 today...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are considering investing in a start up company The founder asked you for $230,000 today and you expect to get $990,000 in 11 years. Given the riskiness of the investment opportunity, your cost of capital is 24%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation alowable in the cost of capital estimate to leave the decision unchanged. COD What is the NPV of the investment opportunity? The NPV of the investment is $ (Round to the nearest dollar.) Should you undertake the investment opportunity? Since the NPV is you should the deall (Select from the drop-down menus) Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The IRR is %. (Round to two decimal places) The maximum deviation allowable in the cost of capital is (Round to two decimal places.) You are considering investing in a start up company The founder asked you for $230,000 today and you expect to get $990,000 in 11 years. Given the riskiness of the investment opportunity, your cost of capital is 24%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation alowable in the cost of capital estimate to leave the decision unchanged. COD What is the NPV of the investment opportunity? The NPV of the investment is $ (Round to the nearest dollar.) Should you undertake the investment opportunity? Since the NPV is you should the deall (Select from the drop-down menus) Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The IRR is %. (Round to two decimal places) The maximum deviation allowable in the cost of capital is (Round to two decimal places.)
Expert Answer:
Answer rating: 100% (QA)
Answer a Cash Flow Year 0 230000 Cash Flow Year 11 990000 Cost of Capital 2... View the full answer
Related Book For
Corporate Finance Core Principles and Applications
ISBN: 978-0077905200
3rd edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford
Posted Date:
Students also viewed these accounting questions
-
You are considering investing in a company that cultivates abalone for sale to local restaurants. Use the following information: The discount rate for the company is 13 percent, the initial...
-
Energy released during the hydrolysis of ATP is Select one: O a. mostly converted to thermal energy. O b. often used to drive exergonic reactions. required to drive the Krebs cycle. O c. d. often...
-
You are considering investing in a bond that matures 20 years from now. It pays an annual end-of-year coupon rate of interest of 8.75 percent, or $87.50 per year. The bond currently sells for $919....
-
What (if anything) is wrong with each of the following statements? a. if (a > b) then c = 0; b. if a > b { c = 0; } c. if (a > b) c = 0; d. if (a > b) c = 0 else b = 0;
-
Joseph and Erica, husband and wife, jointly own all of the stock in Velvet Corporation. The two are currently involved in divorce proceedings, and pursuant to those negotiations, they have agreed...
-
Alaskan Railroad is an independent, stand-alone railroad operation not connected to any other rail service in North America. As a result, rail shipments between Alaska and the rest of North America...
-
This exercise explores the sensitivity of \(\log\)-optimality to the rebalancing frequency. Consider a market consisting of a risk-free asset with zero rate of interest and a stock that over 1 year...
-
Havingn read the BusinessTech article titled "IBM forecast beats estimates for n quarterly sales and earning". Consider the type of research that may n have led to this headline. Do you think it is...
-
Explain how trade with low-wage countries affects jobs in the United States. How can the United States pay its workers higher wages than foreign nations and still be competitive in foreign markets?
-
One way to see whether this procedure will be successful is to split the original data set into two subsets: one subset for estimation and one subset for validation. A regression equation is...
-
Example: We are given 5 objects and weight carrying capacity of knapsack W = 100. For each object, weight w; and value vi are given in the following table. Object i Wi V Vi/Wi 1 10 20 2.0 2 20 30...
-
144.How do the consistency principle and the full disclosure principle affect inventory valuation? 145.What is the effect of an error in the ending inventory balance on the income statement?...
-
Suppose you are thinking of buying a 6-year, $1,000 par value bond with a 7% annual coupon bond. If interest on this bond is paid semi-annually and you required rate of return is 7% annually, how...
-
You are planning to make monthly deposits of $120 into a retirement account that pays 12 percent interest compounded monthly. If your first deposit will be made one month from now, how large will...
-
Jill Price has an incredible memory. Since she was 15 years old, she can remember everything that she has done and every t.v. show she has watched. What type of memory is special for Jill Price?
-
Assuming Just Right Services' fiscal year (FY) runs from January 01 to December 31 each year, which months have actual balances to compare to the operating budget thus far for FY 2021?
-
Canada has an absolute and a comparative advantage over Scotland in producing natural gas and an absolute advantage over Scotland in salmon production. Scotland can produce both products, but only...
-
Starr Co. had sales revenue of $540,000 in 2014. Other items recorded during the year were: Cost of goods sold ..................................................... $330,000 Salaries and wages...
-
Use the sustainable growth rate equations from the previous problem to answer the following questions. No Return, Inc., had total assets of $380,000 and equity of $230,000 at the beginning of the...
-
Refer to the observed capital structures given in Table 15.3 of the text. What do you notice about the types of industries with respect to their average debt-equity ratios? Are certain types of...
-
Assume a firms debt is risk-free, so that the cost of debt equals the risk-free rate, Rf . Define A as the firms asset beta, that is, the systematic risk of the firms assets. Define S to be the beta...
-
Consider the following binary linear programming formulation of a capital budgeting problem. \[ \begin{array}{ll} \text { Max } & 1,200 x_{1}+600 x_{2}+950 x_{3}+1,650 x_{4} \\ \text { s.t. } &...
-
A 1.0-cm-diameter sphere is charged to a potential of \(3400 \mathrm{~V}\). How much charge is on the sphere?
-
a. What is the potential difference between the terminals of an ordinary AA or AAA battery? (If you're not sure, find one and look at the label.) b. An AA battery is connected to a parallel-plate...
Study smarter with the SolutionInn App