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Blackrock Investors LLP, is trying to decide how much percent equity ownership in Pritam Automobile Products Ltd., it will need in exchange for a Rs.

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Blackrock Investors LLP, is trying to decide how much percent equity ownership in Pritam Automobile Products Ltd., it will need in exchange for a Rs. 3 Crores investment Blackrock has a target compound rate of return of 40 percent on venture investments like Pritam Automobile Products. Depending on the success of products currently under development, Blackrock's Investment in Pritam could turn out to be a complete failure (black hole), barely surviving (living dead), or wildly successful (venture utopia). Blackrock assigns probabilities of 0.25, 0.40 and 0.35, respectively, to the three possible outcomes. Following are the three cash flow scenarios or outcomes for the Pritam Automobile Products investment that Blackrock expects to exit at the end of five years. Cashflows (in Rupees) Outcome Probability Year 1 Year 2 Year 3 Year 4 Year 5 Black Hole 0.25 0 0 0 0 0 Living Dead 0.40 0 0 0 0 10 Crores Venture Utopia 0.35 0 0 0 0 45 Crores Calculate the present value of each scenario/ outcome and the total equity value for Pritam Automobile Products. Also determine the acquired percentage of final ownership in Pritam Automobile Products that Blackrock would need for its Rs. 3 Crores Investment

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