383 Chapter 10: Valuing Early-Stage Ventures YEAR CASH FLOW $ 50,000 $ 20,000 $100000 $400,000 $800,000 A. Assume annual cash flows are expected to remain at the $800,000 level after Year 5 (i.e, Year 6 and B No asumt eecah fos are forecasted to be $90,000 in the stepping-stone year and C. Now extend Part B one step further. Assume that the required rate of return on the investment will thereafter). If TecOne investors want a 40 percent rate of return on their investment, calculate the venture's present value. are expected to grow at an 8 percent compound annual rate thereafter. Assuming that the investors still want a 40 percent rate of return on their investment, calculate the venture's present value. drop from 40 percent to 20 percent beginning in Year 6 to reflect a drop in operating or business Calculate the venture's present value. D. Let's assume that TecOne investors have valued the venture as requested in Part C. An outside in- vestor wants to invest $3 million in TecOne now (at the end of Year 0). What percentage of owner ship in the venture should the TecOne investors give up to the outside investor for a $3 million new nvestment? Present Value Valuation Concepts) Assume the forecasted cash flows presented in Problem 2 for the venture also hold for the LowTec venture. However, investors in LowTec have an TecOne Corporation expected rate of return of 30 percent on their investment until Year 6 when th to drop to 18 percent Th 383 Chapter 10: Valuing Early-Stage Ventures YEAR CASH FLOW $ 50,000 $ 20,000 $100000 $400,000 $800,000 A. Assume annual cash flows are expected to remain at the $800,000 level after Year 5 (i.e, Year 6 and B No asumt eecah fos are forecasted to be $90,000 in the stepping-stone year and C. Now extend Part B one step further. Assume that the required rate of return on the investment will thereafter). If TecOne investors want a 40 percent rate of return on their investment, calculate the venture's present value. are expected to grow at an 8 percent compound annual rate thereafter. Assuming that the investors still want a 40 percent rate of return on their investment, calculate the venture's present value. drop from 40 percent to 20 percent beginning in Year 6 to reflect a drop in operating or business Calculate the venture's present value. D. Let's assume that TecOne investors have valued the venture as requested in Part C. An outside in- vestor wants to invest $3 million in TecOne now (at the end of Year 0). What percentage of owner ship in the venture should the TecOne investors give up to the outside investor for a $3 million new nvestment? Present Value Valuation Concepts) Assume the forecasted cash flows presented in Problem 2 for the venture also hold for the LowTec venture. However, investors in LowTec have an TecOne Corporation expected rate of return of 30 percent on their investment until Year 6 when th to drop to 18 percent Th
