3. The owner of WINSEC, wants to determine the present value of his investment. WINSEC is currently in the development stage. The flows during the next 4 years are expected to be as follows in the projected Cash Flows Statement. Cash inflows are expected to be $500,000 in Year 5 and are expected to grow at a 6% annual rate thereafter. Recall that venture investors often use different discount rates when valuing ventures at various stages of their life cycles. For example, target discount rates by life cycle stage are: development stage, 40% startup stage, 45%; survival stage, 35%; and early rapid-growth stage, 25%. As ventures move from their late rapid-growth stages and into their maturity stages, a 15% discount rate is often used. ACCOUNTING STATEMENTS OF CASH FLOWS Year 1 Year 2 Year 3 Year 4 Net Income 10,500 40,777 55,225 65,278 88,971 Adjustments to Net Income for Cash Flow + Depreciation Expense 2,600 5,896 10,637 9,800 10,520 + Change in Accrued Liabilities 5,795 2,000 6,589 3,556 1,195 Change in Inventory 12,870 13,720 -16,200 -47,000 -9,400 + Change in Accounts Payable -5,830 3,590 2,660 22,000 4,703 Change in Accounts Receivable -8,100 2,000 -1,556 -28,332 -7,227 Total Adjustments 7,335 27,206 2,070 -42,976 -209 Net Cash Flows from Operating Activities 17,835 67,983 57,295 22,302 88,762 Cash Flows from Investing Activities Capital Expenditures -100,100 -20,120 -17,344 -40,000 -15,232 Net Cash Flows from Investing Activities Cash Flows from Financing Activities + Equity Issues 0 0 0 0 0 Dividends 0 0 0 0 0 (= Net Dividend) 0 0 0 0 0 + Debt Issues 0 0 0 0 100,500 Net Cash Flows from Financing Activities 0 0 0 Net Changes in Cash and Equivalents -82,265 39,951 -17,698 174,030 Beginning Cash Balance 20,000 39,487 77,730 98,075 125,450 Ending Cash Balance -62,265 a) Determine WINSECs terminal or horizon value and reversion value at the end of the 4 years, assuming the venture will be entering its maturity stage. b) What is the pre-money value of WINSEC? c) What percent ownership should WINSEC be willing to give today to a venture investor, for $200,000 investment? d) What is the Equity Value of WINSEC? e) What percent ownership should WINSEC be willing to give today to a venture investor, for $200,000 investment? f) Apply the VCSC to value the venture. g) What percent ownership should WINSEC be willing to give today to a venture investor, for $200,000 investment?