Refer to the Froth Slope microbrewery example at the beginning of this chapter how does the $ 500,000 piece of the terminal value relate to the future value of the $ 100.000? That is the brewpub investor was looking for a 40% is 100.000* (1.4)^5 = $537.824, slightly more than $ 500,000. Does this mean the investor is not really expected to make 40% on the $400.000, even though we used that discount rate to arrive at the initial $5,856,935 valuation? Returning to the brewpub spreadsheet with all flows included how much more of the venture i ownership of surplus cash flows would have to he sold for the S100,000 if the investor expected to make 70% (given Jim % utopian vision of his future)? What percentage of the brewpub s present value is contained in the present value of the terminal value (the venture's "reversion value")? How much ownership of the brewpub cash flows would need to be sold to an investor demanding 40% but agreeing that the mature brewpub venture would terminally grow at a rate of 8% with a risk profile requiring a discount rate of 16%? What if the terminal growth rate were 10% and the discount rate 18%? (The spread between the discount rate and the growth rate is sometimes referred to as the "capitalization rate "for the terminal flows or just the "cap rate.")