Four times the average gros From the given table Gross profit of 2004 662967 Gross profit of 2003 568223 Average (662967 568223) 2 615595 Hence, valuation comes to 4 times the above value 4 615595 $2,462,380 Presnt value method or NPV method We need to calculate the free cash flow for the Operating income Depreciation drawing of propietor we start from operating income because it gives the total profit after all the expenses Depreciation is added back to free cash flow because it is not an actual cash transaction, it is an expense which is occuring by usage of assets and wear and tear of assets, example furniture has a lifetime of usage 5 years so the usage will be taken as expense with passage of time, but it is not an actual cash flow so it has to be added back Drawings of S ramirez is subtracted since it is given that it is in addition to the expenses listed above and this money is not available to the hotel property for its cash flow and expenses Free cash flow for year 2004 265187 50000 72000 88000 22000 75000 422187 Free cash flow for year 2003 215533 50000 68500 82000 23000 72000 367033 Free cash flow for year 2002 177000 50000 65000 82000 27000 70000 331000 Presnt value formula PV C (1 r) n PV of cash flow of 2004 is the same as the actual cash flow because we are calculating the prensent value at 2004 PV for 2003 cash flow 367033 (1 8 ) 1 396395 PV for 2002 cash flow 331000 (1 8 ) 2 386078 Average of past three years cash flow present value (422187 396395 386078) 3 401553 The valuation is calculated using NPV formula NPV C x (1 (1 R) T ) R C cash flow, R discount rate 8 , T time period 10 years NPV 401553 (1 (1 8 ) 10) 8 401553 (1 (1 08) 10) 08 401553 (1 0 4632) 08 $2,694,420 63 Combining the values obtained for valuation as given 40 2,462,380 60 2694420 6 984952 1616652 4 2601604 4 Final valuation using the given details and method $2,601,604 4 Q ) Assume the verification of Petersons accounting did not result in enough loan value to avoid needing title to the vacant land and that the lien release was critical for the loan to proceed Using the materials provided to you in the attached library (assume that the applicable precedent is from the fictional jurisdiction of the state of Green provided to you in the attached library), please address all elements of Ms Roses negligence cause of action against First Bank of Green Assume First Bank of Green is liable for its employees actions

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Four times the average gros From the given table: Gross profit of 2004 = 662967 Gross profit of 2003 = 568223 Average = (662967+568223)/2 =

Four times the average gros

From the given table:

Gross profit of 2004 = 662967

Gross profit of 2003 = 568223

Average = (662967+568223)/2 = 615595

Hence, valuation comes to 4 times the above value = 4*615595 = $2,462,380

Presnt value method or NPV method:

We need to calculate the free cash flow for the =

Operating income +Depreciation - drawing of propietor

we start from operating income because it gives the total profit after all the expenses.

Depreciation is added back to free cash flow because it is not an actual cash transaction, it is an expense which is occuring by usage of assets and wear and tear of assets, example furniture has a lifetime of usage 5 years so the usage will be taken as expense with passage of time, but it is not an actual cash flow so it has to be added back.

Drawings of S. ramirez is subtracted since it is given that it is in addition to the expenses listed above. and this money is not available to the hotel property for its cash flow and expenses.

Free cash flow for year 2004 = 265187 + 50000+72000+88000+22000 - 75000

= 422187

Free cash flow for year 2003 = 215533 + 50000 + 68500 + 82000 + 23000 - 72000

= 367033

Free cash flow for year 2002 = 177000 + 50000+65000+82000+27000 - 70000

= 331000

Presnt value formula: PV = C/(1+r)ⁿ

PV of cash flow of 2004 is the same as the actual cash flow because we are calculating the prensent value at 2004.

PV for 2003 cash flow = 367033/(1+8%)^-1 = 396395

PV for 2002 cash flow = 331000/(1+8%)^-2 = 386078

Average of past three years cash flow present value = (422187+396395+386078)/3 = 401553

The valuation is calculated using NPV formula

NPV = C x {(1 - (1 + R)^-T) / R}.................C cash flow, R discount rate = 8%, T time period = 10 years

NPV = 401553*(1 - (1+8%)^-10)/8%

= 401553*(1 - (1.08)^-10)/.08

= 401553*(1-0.4632)/.08

= $2,694,420.63

Combining the values obtained for valuation as given = 40%*2,462,380 +60%*2694420.6

= 984952 + 1616652.4

= 2601604.4

Final valuation using the given details and method = $2,601,604.4

Q.) Assume the verification of Petersons accounting did not result in enough loan value to avoid needing title to the vacant land and that the lien release was critical for the loan to proceed. Using the materials provided to you in the attached library (assume that the applicable precedent is from the fictional jurisdiction of the state of Green provided to you in the attached library), please address all elements of Ms. Roses negligence cause of action against First Bank of Green. Assume First Bank of Green is liable for its employees actions.