An investor is considering an offer to buy equity in a start-up company. The investor will not receive in cash flows from the company until 10.00 years from today. At that time he will receive 10.00 consecutive annual payments of $52,454.00. The investor wants a 24.00% return on his investment. How much can he pay today for this opportunity to receive his return?
Discount rate | 24.0000% | ||
Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
52,454.000 | 0 | 52,454.00 | 52,454.00 |
52,454.000 | 1 | 42,301.61 | 94,755.61 |
52,454.000 | 2 | 34,114.20 | 128,869.82 |
52,454.000 | 3 | 27,511.45 | 156,381.27 |
52,454.000 | 4 | 22,186.66 | 178,567.93 |
52,454.000 | 5 | 17,892.47 | 196,460.39 |
52,454.000 | 6 | 14,429.41 | 210,889.80 |
52,454.000 | 7 | 11,636.62 | 222,526.42 |
52,454.000 | 8 | 9,384.37 | 231,910.79 |
52,454.000 | 9 | 7,568.04 | 239,478.83 |
value in 10 years = 239,478.83
amount he should pay today = 239,478.83/1.24^10 = 27,864.44
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