Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Ben Toucan wants to estimate the value of his idea for a new restaurant in Aspen Colorado. The project is in the Development/Start-up Stage. He began in the spring of 2012 with site selection and purchase/lease payments; contracting build out; equipment procurement and staffing at a total cost of $ 250,000. He expects the restaurant will open in 2013, but will not begin to Build Cash through positive Cash Flows until 2016. After tax cash flows during the start-up/growth periods are expected to be: 2013 (-$.25 MIL); 2014 (-$.5 MIL); 2015 (-$.1 MIL); 2016 ($ 1.5 mil) 2017 ($ 4.5 MIL). After 2017 Restaurant Cash Flows are projected to grow at 4% per year.

Ben will personally fund all costs through early 2014, when he will need to raise $ 1.2 MIL in external capital which he expects will get the project to positive cash flow and sustainment in 2015. He expects that 2014 investors will require a 30% return to compensate for the risk of they are taking at that time. He needs to estimate the value of his business before beginning negotiations with investors.

1. What is the value of the DISCREET CASH FLOWS which Ben projects through 2017?

2. What is the Terminal Value of the restaurant's projected Cash Flows?

3. Based on your answers in 1 & 2 above, what percentage ownership interest will Ben have to surrender to raise $1.2 MIL in 2014?

4. If the restaurant sells to an outside buyer to net $13,500,000 in 2016; and the only two owners are Ben and the 2014 investor, how will the Sales proceeds be divided? (HINT: to figure this out, consider the % ownership you find outd in #3 above)

5. If the investor's money is tied up for 2.5 years, what return will she realize on her investment?

6. What return would be realized if the investor insisted upon (AND SHE GOT) 35% of the company in 2014?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M940585

Have any Question? 


Related Questions in Basic Finance

A manufacturer of cream filled donuts wants to make sure

A manufacturer of cream filled donuts wants to make sure that its automatic filling process is on target. Based on a sample of 25 donuts the mean weight of cream filling is estimated to be 15 grams with a standard deviat ...

Ethics and financethe sarbanes-oxley act of 2002 sox was

Ethics and Finance The Sarbanes-Oxley Act of 2002 (SOX) was passed as the result of the Enron scandal and other instances of accounting fraud. This act was passed to strengthen the role of the Securities and Exchange Com ...

1 by how much will the clamping force on the joint be

1 .By how much will the clamping force on the joint be reduced? Sketch the new joint diagram, assuming maximum initial preload ? Compute the estimated maximum bolt tension and minimum clamping force under the 3,000 lbs e ...

1 to what agencies and other users of financial statements

1. To what agencies and other users of financial statements must banks report? 2. Why must the user be cautious in analyzing bank holding companies? 3. What is usually the biggest expense item for a bank? 4. What does th ...

Ac corp currently uses no debt and its beta is 120

ABC Corp. currently uses no debt and its beta is 1.20. Further, ABC's CFO is considering moving to a capital structure with 40% debt. Assume the company's current ROE is 10.0%, its tax rate is 35.0%, the risk free rate a ...

Question 1 a call provision gives bondholders the right to

QUESTION 1: A call provision gives bondholders the right to demand, or "call for," repayment of a bond. Typically, calls are exercised if interest rates rise, because when rates rise the bondholder can get the principal ...

What exactly is a homemade dividend does this concept

What exactly is a homemade dividend? Does this concept lessen the importance of dividend policy?

1 describe the purpose of each of the five different

1. Describe the purpose of each of the five different research strategies. 2. Develop an example of a research study that contains a confounding variable. 3. Explain how using college students as participants in a study ...

Consider a currency swap with but two payment dates which

Consider a currency swap with but two payment dates, which are one year apart, and no exchange of notional principals. On the first date, the party pays U.S. dollars at a rate of 4 percent and receives British pounds at ...

1 explain the differences between transactional and

1. Explain the differences between transactional and relationship marketing. How do these differences lead to increasing emphasis on logistical performance in supply chain management? 2. Why are the four primary service ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro