Problem 1. Ellen is a co-founder of a venture called \WholesomeExperience" where she has a 10% stake. If she keeps working hard developing WholesomeExperience, there is 10% chance that she will be able to sell the venture through acquisition for $130 million in 3 years from today. If the acquisition fails, the venture will get $1 million. Currently, Ellen has an outside job oer from a big corporation that pays $350,000 per year according to a guaranteed 3-year employment contract. 1. Compute the current economic value of Ellen's stake in WholesomeExperience assum- ing that Ellen is risk neutral and the risk-free rate is 2.5% per year. 2. Compute the current economic value of Ellen's stake in WholesomeExperience assum- ing that Ellen is risk averse and the risk-adjusted discount rate she is using in the valuation is 15% per year. 3. Compute the current economic value of Ellen's employment contract assuming that Ellen is risk neutral. Should Ellen continue with her entrepreneurship eorts or take the job oer? 4. Compute the current economic value of Ellen's employment contract assuming that Ellen is risk averse. Should Ellen continue with her entrepreneurship eorts or take the job oer? 5. Suppose Ellen's utility function is u(x) = x1 1 , where = 0:5. Compute the certainty equivalent value of Ellen's equity at the time she is making the decision to continue with her entrepreneurship eorts or take the job oer. Explain what the result means using one or two sentences. 6. Compute answers to part 5. if = 2. Compare the result with your result in part 5. and explain what the result means using one or two sentences. 2
Aszimer.ccAdobe Acroba: Kouder Home Tools Assignment V.pdf x (? R- mum 20 Search Menu B Export PDF Adobe Export PDF Problen 1. Ellon is a w-lounder of a venture called "Wholesome Experience when she has a 10% stake. If she keeps working hard developing WholesomeExperience, there is 10% chance that she will be able to sell the venture through arquisition for $1311 million in :3 years run toxlay, I the acquisition fails, the return will get $1 million. Currently, Ellu bis in vulsike job der livet is big corporation Cul pays $350,000 per year ikcurling lu il graniceed 3-year employment contract Convert PDF Files to end or Forlinin Salut Porrile Assignmenty.pl X 1. Campure the current economic maine of Ellen's stake in Wholesome Experience assum ing that Ellen is risk neutral and the risk the rate is 2.1 yar Convert Microsoft Wivu 2. Compute the current economic value of Ellen's stake in WholesomeExperience assum- ing that Ellen is risk verse and the risk-srljusted discount rate she is utaing in the valuation Jocurent language Eng sh (US) Change is 15% jer war 3. Compule the current coonomic value of Ellen's employmell atract resuming t. Ellen is riak neutral. Should Illell continue with her entrepreneurship efforts or take the job ofler? Convert View: Corverled File 4. Compate the current economie value of Ellen's employment contract assuming that Ellen is risk svense Suul El'n woelie wil er varepruurslipelluris or lalu the job ukri 3. Suppose Ellen's utility function is us=4 where 1 = 13. Compute the certainty cuivalent valent Ellen's equity at the time she is making the decision ta continue with her prestip flats ar take the job offer. Explain what the result mans using one or Edit PDF P. Create PDF 6. Compute answers to part 1. if ; = 2. Compare the result with your result in part 3. Jexplaint wall result was using on USERS. Croaleli na PDI Toms Agreement Stert reci Day Iris! [ + w ENG 19:25 PM 2020-19-17 Aszimer.ccAdobe Acroba: Kouder Home Tools Assignment V.pdf x (? R- mum 20 Search Menu B Export PDF Adobe Export PDF Problen 1. Ellon is a w-lounder of a venture called "Wholesome Experience when she has a 10% stake. If she keeps working hard developing WholesomeExperience, there is 10% chance that she will be able to sell the venture through arquisition for $1311 million in :3 years run toxlay, I the acquisition fails, the return will get $1 million. Currently, Ellu bis in vulsike job der livet is big corporation Cul pays $350,000 per year ikcurling lu il graniceed 3-year employment contract Convert PDF Files to end or Forlinin Salut Porrile Assignmenty.pl X 1. Campure the current economic maine of Ellen's stake in Wholesome Experience assum ing that Ellen is risk neutral and the risk the rate is 2.1 yar Convert Microsoft Wivu 2. Compute the current economic value of Ellen's stake in WholesomeExperience assum- ing that Ellen is risk verse and the risk-srljusted discount rate she is utaing in the valuation Jocurent language Eng sh (US) Change is 15% jer war 3. Compule the current coonomic value of Ellen's employmell atract resuming t. Ellen is riak neutral. Should Illell continue with her entrepreneurship efforts or take the job ofler? Convert View: Corverled File 4. Compate the current economie value of Ellen's employment contract assuming that Ellen is risk svense Suul El'n woelie wil er varepruurslipelluris or lalu the job ukri 3. Suppose Ellen's utility function is us=4 where 1 = 13. Compute the certainty cuivalent valent Ellen's equity at the time she is making the decision ta continue with her prestip flats ar take the job offer. Explain what the result mans using one or Edit PDF P. Create PDF 6. Compute answers to part 1. if ; = 2. Compare the result with your result in part 3. Jexplaint wall result was using on USERS. Croaleli na PDI Toms Agreement Stert reci Day Iris! [ + w ENG 19:25 PM 2020-19-17
