Jim, the owner-manager of the Frothy-Slope microbrewery and restaurant in a small Colorado ski town, who has recently been the object of potential investor attention. The success of his first brewpub and the local popularity of his microbrews have resulted in a direct offer to invest $100,000 in ongoing operations and a desire to consider bottling and broader distribution. Although Jim has a business degree, complete with introductory exposures to accounting and finance, he is most comfortable overseeing the production of his handcrafted honey wheat ale. While he welcomes the eager investor, he also has no feeling for how much ownership he should be willing to sell in exchange for the $100,000 investment.

1. I have $50,000 of my own cash in the brewpub and one and a half years of

seventy-hour weeks.

2. I have taken only a small amount of cash out of the business for my living

expenses, certainly not equal to a reasonable wage.

3. In college, I worked at a brewpub for $10 an hour, but that college degree ought

to be worth at least $5 more per hour.

4. It seems like I have about $131,900 [$50,000 + (78 70 $15)] of cash and

sweat in this brewpub.

5. $100,000 + $131,900 = $231,900, and 100,000/231,900 is about 43 percent.

6. I can take the $100,000, remain the majority owner, and take a shot at the big

time.

(1)How will the investor make a return on the $100,000 investment?Does this relate to the existing investment?