A financial services company is considering a new investment in a new technology platform for investment management. The company has identified a fintech startup that is seeking funding at a valuation of $5 million. The company expects to receive a dividend of $200,000 per year over a five year term and sells it equity stake at a valuation of $10 million. What is the expected return on investment if the financial services company invests $2 million in the fintech startup
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A financial services company is considering a new investment in a new technology platform for investment management. The company has identified a fintech startup that is seeking funding at a valuation of $5 million. The company expects to receive a dividend of $200,000 per year over a five year term and sells it equity stake at a valuation of $10 million. What is the expected
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- A startup company has developed a new mobile app that has the potential to disrupt the market. The company is seeking funding to launch and market the app. The company is considering two financing options: equity financing with a venture capital firm that offers a valuation of $10 million and debt financing with a bank at an interest rate of 10% over a five-year term. What is the percentage of ownership the venture capital firm will have if it invests $5 million at a valuation of $10 million?Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options. Consider the case of Shoe Building Inc.: Shoe Building Inc. is considering a three-year project that will require an initial investment of $55,000. It has estimated that the annual cash flows for the project under good conditions will be $40,000 and $11,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is your answer to the nearest whole dollar.) Shoe Building Inc. wants to take a potential growth option into account when calculating the project's expected NPV. If conditions are good, the firm will be able…A fin-tech firm is considering devising a new payment system. The initial cost for developing this system will be $20 million today. Once the system development is completed, in one year, the system will be sold to a major bank for $25 million. Assume that both the development of the system and the sale of the project for $25 million are certain. The firm can pay $20 million of investment entirely using its own cash. Or the firm can also raise funds to finance part of the investment by issuing a security that will pay investors $11 million in one year. Suppose the risk-free rate of interest is 10%. What is the NPV of this project if the fin-tech firm invests its own money and does not issue the new security? What is the NPV if the firm issues the new security? Briefly explain your answer by comparing the NPVs
- SVR Clinical Research, LLC Mrs. Seaver, a microbiologist and pharmacist, has developed a drug therapy to treat dysphagia (swallowing problems). She discovered that a combination of existing drugs should address problems with swallowing that have only marginal treatments available to date. Since the therapy is using currently approved drugs, safety of the treatment is expected. It should allow the drug to enter Phase 2 clinical trials very soon after the firm raises its first $3 million in seed capital. Startup investors recognize that they are investing in firms with no history and with significant risk. They evaluate investment opportunities using required returns in the range of 10x5 (That is, the investors want to have their investment return to be 10 times great than the initial investment at the end of 5 years.) Mrs. Seaver's team has developed a clinical trial plan using major research medical centers such as the Vanderbilt University Medical Center and the Cleveland Clinic. The…Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options. Consider the case of Weghorst Co.: Weghorst Co. is considering a three-year project that will require an initial investment of $55,000. It has estimated that the annual cash flows for the project under good conditions will be $80,000 and $10,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is . (Note: Round your answer to the nearest whole dollar.) 67, 780 40,668 57,613 44,057 Weghorst Co. wants to take a potential growth option into account when calculating the project’s…Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options. Consider the case of Hack Wellington Co.: Hack Wellington Co. is considering a three-year project that will require an initial investment of $55,000. It has estimated that the annual cash flows for the project under good conditions will be $40,000 and $11,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is$7,234 . (Note: Round your answer to the nearest whole dollar.) Please do not provide answer in image formate thank you. Hack Wellington Co. wants to take a potential growth option into account when…
- Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options. Consider the case of Hack Wellington Co.: Hack Wellington Co. is considering a three-year project that will require an initial investment of $55,000. It has estimated that the annual cash flows for the project under good conditions will be $60,000 and $10,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is . (Note: Round your answer to the nearest whole dollar.) Hack Wellington Co. wants to take a potential growth option into account when calculating the project’s expected NPV. If…Question What is primary and secondary market? An IPO is undertaken on primary or secondary market? What is the essential job of an investment banker? Why a stock exchange is called an auction market? What are the five basis principles of finance? Your company is considering choosing one of the two projects: Project Gold and Project Diamond. Each project will last 5 years and have no salvage value at the end. The company’s required rate of return for all investment projects is 9%. The cash flows of the two projects are provided below. Gold Diamond Cost $485 000 $520 000 Future Cash Flows Year 1 Year 2 Year 3 Year 4 Year 5 105 850 153 250 225 650 245 000 250 350 117 050 162 400 275 500 255 000 260 000 Required: Identify which project should your company accept based on Discounted Payback Period method if the payback criterion is maximum of 2.5 years.Imagineering, Inc., is considering an investment in CAD-CAM compatible design software with the cash flow profile shown in the table below. Imagineering’s MARR is 18%/year. Solve, a. What is the future worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on future worth? c. Should Imagineering invest?
- Companies invest in expansion projects with the expectation of increasing the earnings of their businesses. Consider the case of IQMetrics Corporation. IQMetrics is proceeding with a new expansion project that is anticipated to have a four-year life span. The project calls for the purchase of a building for $5 million and equipment valued at $3 million. IQMetrics’s corporate tax rate is 30%, and its discount rate is 10%. Upon completion of the project, the company expects the salvage values to be $4 million and $2 million, respectively. The capital cost allowance (CCA) rate for the asset classes as given by the Canada Revenue Agency (CRA) are buildings, 4%; equipment, 20%; and manufacturing assets, 30%. Calculate the present value for the total tax shield. The present value isAs corporate manager for acquisitions, your group is assessing a project that is expected to produce cash flows of $750 at the end of year 1, $1,000 at the end of year 2, $850 at the end of year 3, and $2,000 at the end of Year 4. If the firm requires a minimum IRR or "hurdle rate" of 10% for these types of investments, what is most you should pay for this project? Your answer should be between 2738.00 and 4355.00, rounded to 2 decimal places, with no special characters.Companies often come across projects that have positive NPV opportunities in which the company does not invest. Companies must evaluate the value of the option to invest in a new project that would potentially contribute to the growth of the firm. These options are referred to as growth options. Markung's Co. is considering a three-year project that will require an initial investment of $30,000. It has estimated that the annual cash flows for the project under good conditions will be $60,000 and $11,000 under bad conditions. The firm believes that there is a 60% chance of good conditions and a 40% chance of bad conditions. If the firm is using a weighted average cost of capital of 13%, the expected net present value (NPV) of the project is round intermediate calculations and round your answer to the nearest dollar.) . Markung's Co. wants to take a potential growth option into account when calculating the project's expected NPV. If conditions are good, the firm will be able to invest…