Question
Vail Venture Investors, LLC is trying to decide how much percent equity ownership in Black Hawk Products, Inc. it will need in exchange for a
Vail Venture Investors, LLC is trying to decide how much percent equity ownership in Black Hawk Products, Inc. it will need in exchange for a $5 million investment. Vail Venture Investors has a target compound rate of return of 28.50 percent on venture investments like Black Hawk Products. Depending on the success of products currently under development, Vail Ventures investment in Black Hawk could turn out to be a complete failure (black hole), barely surviving (living dead), or wildly successful (venture utopia). Vail Venture assigns probabilities of 0.39, 0.27, and 0.34, respectively, to the three possible outcomes. Following are the 3 cash flow scenarios or outcomes for the Black Hawk Products investment that Vail Venture expects to exit at the end of five years. Outcome Yr1 Yr2 Yr3 Yr4 Yr5 Black Hole 0 0 0 0 $0.00 Living Dead 0 0 0 0 $6,069,000.00 Venture Utopia 0 0 0 0 $40,725,000.00 Calculate the weighted present value of three outcomes for Black Hawk Products. Group of answer choices $3,314,824.05 $4,419,765.40 $5,259,520.82 $4,817,544.28 $4,994,334.90
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started