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Your sister Yuliana wishes to start a lawn mowing business for the summer but needs $500 to purchase an industrial lawn mower and other equipment.
Your sister Yuliana wishes to start a lawn mowing business for the summer but needs $500 to purchase an industrial lawn mower and other equipment. You are willing to help out for educational purposes, and you are confident with her character and work ethic. Therefore, you make an offer of $500 for X% stake in the venture using your typical terms of 36%/year nominal rate of return, compounded monthly. She has created the following cash flow forecast for the summer starting in the end of March: {-500, 300, 500, 700, 900, 900, 900}. In addition, Yuliana also plans to sell the mower in October for $300 and return the proceeds to the venture. What is the Net Present Value of this cash flow? What percent equity (X%) would you require to match your target ROI and monthly compounding terms?
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