Assume that Bloomington has two food delivery services that deliver food orders anywhere in town late at night: Heavenly Crumble Co. and Fantastic Vittles. Each company owns a truck with a fair value of $8,000. Limited financial information for each firm at 12/31/21 is as follows: Heavenly Crumble Truck (amortized cost) $5,000 Revenues $10,000 Return on operating assets 200%

Fantastic Vittles

Truck (amortized cost) $10,000

Revenues $10,000

Return on operating assets 100%

Both companys delivery vehicles have a remaining service life of 3 years. Assume a new vehicle with a service life of 10 years can be purchased in three years for $15,000. Both companies are expected to experience growth of 3% per year over the foreseeable horizon.

a. Assuming no liabilities, how much capital does each proprietor have invested in their firm? b. If your private equity firm is looking to invest in a delivery firm, which firm do you estimate is worth more? Explain.