Question
After making your first $100 Million with your OBD II technology startup, you chose to become an Angel Investor. Congratulations on wanting to pay it
After making your first $100 Million with your OBD II technology startup, you chose to become an Angel Investor. Congratulations on wanting to pay it forward (and make good money while doing so). You are currently weighing the options of investing into three different companies. You have done your due diligence and have identified the probable market performance of each (see Table below). All three companies have a similar degree of alignment with your business and technology interests, so your decision to invest is purely a financial one. You have decided that if you invest in either company, you will invest $3,500,000. Each company will be able to go to market in one year after investment.
Using NPV (use a discount rate of 6%) and Expected Value, D
ecide in which of these companies (if any), deserves your investment? Explain your answer.
| Company A | Company B | Company C | |
| Likelihood of good market | 35% | 45% | 40% |
| Likelihood of medium market | 50% | 30% | 40% |
| Likelihood of project fail (no revenue) | 15% | 25% | 20% |
| Good Market Revenue | |||
| Market Year 1 | 1,250,000 | 750,000 | 1,500,000 |
| Market Year 2 | 2,250,000 | 3,500,000 | 3,200,000 |
| Market Year 3 | 2,500,000 | 1,750,000 | 2,000,000 |
| Medium Market | |||
| Market Year 1 | 1,000,000 | 500,000 | 500,000 |
| Market Year 2 | 2,000,000 | 2,500,000 | 1,750,000 |
| Market Year 3 | 1,750,000 | 1,250,000 | 1,500,000 |
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