The Japanese girl, Miho, in the earlier bagel case, estimates that she would need to invest

about $$50,000$ to purchase the necessary supplies and equipment. She has $$20,000$ in

savings, but still needs additional $$30,000.$ One of her best friends, Amy, is willing to

write her the check of $$30,000,$ if she is willing to sell Amy an equity stake in the

business. Miho really likes the idea of owning her bagel business outright. But Miho is

not sure what percentage of her total equity she should offer Amy in exchange for

$$30,000.$ She could also try to take loans from Banks.

Here are Miho$$s estimates about her bagel business for the first year:

$$ an average of $6000$ bagels per month at $$1\mathrm{.}65$ each

$$ The variable cost per bagel is $$\mathrm{.}45$

$$ The monthly fixed cost is $$5,000$

$$ Tax @ $25\%$

So$,$ the estimated annual net profits are $ $19,800.$ After adjustment, the annual net cash

flow is $$20,000.$

Read the above scenario, think about:

$$ What you would do if you were Miho, sell or borrow?

$$ If Miho decides to sell, what percentage of her equity she should offer Amy in exchange

for $$30,000?$ Please read the next page before answering the questions. A quantitative

analysis in support of your answer is preferred. You may try the discounted future cash

flows approach or an online calculator $($see above$)$ to calculate the business value first,

then decide on the percentage.