Question
Ginnys Restaurant Problem Ginny is endowed with $10 million and is deciding whether to invest in a restaurant. Assume perfect capital markets with an interest
Ginnys Restaurant Problem
Ginny is endowed with $10 million and is deciding whether to invest in a restaurant. Assume perfect capital markets with an interest rate of 6%.
| Investment Option | Investment (millions) | End of Year CFs (millions) |
| 1 | 1 | 1.8 |
| 2 | 2 | 3.3 |
| 3 | 3 | 4.4 |
| 4 | 4 | 5.4 |
- Suppose Ginny does not want to use her own $2 million to start the new venture. Instead, she wants to raise equity capital by issuing 100,000 new shares. What price will new investors be willing to pay?
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Master Your Money Insider Secrets For Financial Success
Authors: William J. Ramirez
1st Edition
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