Net Present Value and Venture Capital Assignment

timer Asked: Feb 3rd, 2019
account_balance_wallet $9.99

Question Description

  1. What is the IRR of the following cashflows?
    • Now: - $120
    • After 1 year: + $20
    • After 2 years: + $90
    • After 3 years: - $10
    • After 4 years: + $30
    • After 5 years: + $30
    • After 6 years: + $30
    • After 7 years: + $40
  1. Which of the following statements is not true?
    1. The IRR measures an annual percentage return on investment
    2. The IRR calculation is reliable over long periods of time
    3. The IRR-hurdle rate comparison helps assess an investment's viability
    4. Discounting future net earnings at the IRR makes the net present value
      of an investment, i.e. money in minus money out, equal to zero
  1. A well-known piano manufacturer wishes to expand in China. It decides that 80% of the $32 million it needs will come from debt, and the remaining 20% from selling equity. The cost of debt is 7% and the corporate tax is 35%. To estimate the cost of equity, the firm uses the CAPM with these parameters:equation
    • What is the WACC, or hurdle rate, of the investment?
    • If the IRR of the investment is estimated at 7 %, should it proceed?
  1. Founders are issued common stock but investors get preferred stock, and have priority recovering the investment when the business is sold. VC investor Fred Wilson believes that entrepreneurs can get a shot at a fair deal if they understand where investors are coming from. He discusses preferred stocks, investors' need for a liquidation preference, and gives us a model for liquidation analysis; see FW1, FW2, FW3, and FW4.Here is the last question in this week's assignment. Are investors any different to ordinary buyers of stocks and bonds in seeking some assurance of liquidity? Give at least two reasons why they are and two reasons why they are not.

Tutor Answer

School: Purdue University

Hey! Kindly find the attached answer. Thank you and all the best



Net present value



IRR can be evaluated using the IRR function in Excel to obtain the following results;
Cash flows


After 1 year


After 2 years


After 3 years


After 4 years


After 5 years


After 6 years


After 7 years



Statement 1 ...

flag Report DMCA

Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

Similar Questions
Related Tags

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors