Purchase Solution

Fixed capital investment rates

Not what you're looking for?

Ask Custom Question

You are given the following information:
? Baseline (last year) sales: $10 million
? Sales growth rate years 1-10: 25%
? Sales growth rate after year 10: 5%
? Profit margin years 1-10: 20%
? Profit margin after year 10: 10%
? Fixed capital investment rate: 10%
? Working capital investment rate: 7%
? Cash tax rate: 30%
? Cost of capital: 20% during years 1-10; and 12% after year 10
? Marketable securities: $2 million
? This company is privately held.

Answer the following questions:

1. What is the value of this company?
2. Say your opportunity cost (as an independent investor) of capital for an investment of this risk is 18% and that the firm offers you a 20% ownership of the company for $6 million, would you accept this offer as one that increases your wealth? If yes, why yes? If not, why not?

Purchase this Solution

Solution Summary

Fixed capital investment rates are depicted.

Solution Preview

See the attached file. Thanks

Constant Growth rate after 10 years 5.00%
Discount rate after 10 ...

Purchase this Solution


Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.