Purchase Solution

Calculating PV etc.

Not what you're looking for?

Ask Custom Question

I need to calculate the price for both the best and worst case scenarios. I have attached a spreadsheet with the best and worst cases. I want to calculate each using a discount rate of 9.7% and then also using 11.2%. This is the hint the teacher gave us, but i still cant figure it out:

Your first step is to determine the appropriate discount rate to use. I encourage you to have that discussion in the discussion area and decide as a group.

Next, using the best case scenario cash flows you produced for Blue Mesa Task 3, and the worst case which are provided, you need to discount each of those annual cash flows to put them into present value terms.

The terminal value is essentially a growing perpetuity that begins in year 10 of the forecast period. To calculate the terminal value, divide the year 10 cash flow by the difference between the discount rate and the estimated rate of growth of the perpetuity. Then, discount that terminal value number for 9 periods to put it into present value terms.

Sum the discounted terminal value with the other 9 discounted cash flows, and subtract the initial investment, which is the Laredo debt payoff, and you should be good to go!

Purchase this Solution

Solution Summary

The solution calculates PV for the best and worst case scenarios.

Purchase this Solution


Free BrainMass Quizzes
Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Motivation

This tests some key elements of major motivation theories.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.