1. You have invested in a company with the following statistics... Annual Revenu
ID: 2475735 • Letter: 1
Question
1. You have invested in a company with the following statistics...
Annual Revenue $2M
Annual profit $400k (20% of revenues)
Cost of Purchase $7M – all paid at the start.
Annual Growth – 20% in both sales revenue and profit
1) What is the Present Value of this purchase over a period of 5 years. Your cost of money is 10%
2) If you could purchase additional equipment (at the start) that cost $1.5M but would reduce annual costs by $250k. Would this purchase be worthwhile. – Worthwhile would mean that the return on the total investment after the sale in question 3 was increased..
3) As the owner of the company, you would be responsible for losses, but you would also get to keep all profits. If you could sell this company at the end of 5 years for 4x annual revenue for the last year, what rate of return would you get on your investment?
4) The tax man arrives – and you pay 25% of all profits for each of the 5 years. What does this do to the rate of return on the investment.
Explanation / Answer
Answer:1
Cost of capital 10% Particulars Cash Flow Investment -7000000 Profit 400000 400000 400000 400000 400000 NPV -5483685.292Related Questions
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