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Thank you so much Intro You are thinking of buying a startup for $40 million. The company will generate free cash flows of $6 million
Thank you so much
Intro You are thinking of buying a startup for $40 million. The company will generate free cash flows of $6 million per year forever. You can take out an interest-only loan with an interest rate of 6%. The loan does not require any principal repayments and will go on forever. The weighted average cost of capital is 14% and the tax rate is 40%. Part 1 Attempt 1/10 for 10pts. What is the NPV of buying the startup (in \$million)? Correct 2 NPV=FCF0+KWFCF=40+0.146=2.857(million) art 2 Attempt 3/10 for 10 pts. How much of the $40 million should you borrow to achieve an internal rate of return of 22% on your equity investment? Part 3 Attempt 1/10 for 10 pts. How much of the $40 million should you borrow to achieve an internal rate of return of 80% on your equity investmentStep by Step Solution
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