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

1 discuss how the planningcoordination and operation flow

1. Discuss how the planning/coordination and operation flow differs for MTO and MTS firms. 2. Compare and contrast the role of planning/coordination and operations in improving firm competitiveness. 3. Compare and contra ...

1 describe in your own words the techniques that scientists

1. Describe in your own words the techniques that scientists use to help them avoid drawing statistically invalid conclusions. 2. What is a statistically significant result? What is the relationship among statistical sig ...

Enter the home page of the careers in business web site

Enter the home page of the Careers in Business Web site (http://www .careers-in-business.com), and page through the finance positions listed and their corresponding salaries. What skill sets or job characteristics lead t ...

Drozshiking gear company has found that its common equity

Droz'sHiking Gear Company has found that its common equity shares have a beta equal to 1.50 while the risk-free return is 12 percent and the market risk premium is 6 percent. It has 10-year bonds outstanding with a marke ...

A firm is considering the development of severalnew

A firm is considering the development of severalnew products. The products under consideration are listed in the next table. Products in each group are mutually exclusive. At most, one product from each group will be sel ...

Assignmentglobal stock market and exchange rate

Assignment Global Stock Market and Exchange Rate Fluctuations Financial crises have short-term and long-term effects. However, most often analysts are focused only on short-term effects. In this assignment, you will be c ...

Normas cat food of shell knob ships cat food throughout the

Norma's Cat Food of Shell Knob ships cat food throughout the country. Norma has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by two ...

Why might a company pay as a stock dividend list the three

Why might a company "pay" as a stock dividend? ?. List the three possible explanations for why companies pay cash dividends ? Identify three different methods that a company can use to repurchase its own stock from inves ...

1 what is the function of the optional delivery commitment2

1. What is the function of the optional delivery commitment? 2. Name five important characteristics of mortgage pools. Tell why each is important. 3. Why was the formation of FHLMC so important?

What is the firms goal with regard to cash collections

What is the firm's goal with regard to cash collections? Describe each of the following types of collection systems: a. Field-banking system b. Mail-based collection system c. Electronic system.

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen