Your industry typically values a business using a 25 percent discount rate. Youve forecasted that your company, Brady Technologies, LLC, will enjoy expected cash flows for the next five years as follows:

Note the following present value factors for a 25 percent discount rate: 0.8000 (n = 1), 0.6400 (n = 2), 0.5120 (n = 3), 0.4096 (n = 4), 0.3277 (n = 5). Calculate the equity value of your business using the discounted cash flow method, using a 25 percent discount rate, and assuming that the expected cash flow of the last forecasted year will stabilize and continue to grow in perpetuity by 2 percent per year. Next, answer the following questions: If an investor approaches you and wants to invest $180,000 in Brady Technologies, LLC, what percentage ownership of the company might this investment represent? Justify your answer. If you wish to sell your 60 percent ownership interest in Brady Technologies, LLC to your business partners, what would likely be the numerical basis for your asking price? If your company has $250,000 of debt and $25,000 of cash on its balance sheet, what is the enterprise value of your business? Solution: 1. 2. 3.