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The company Nocta AS currently has 4 owners

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The company Nocta AS currently has 4 owners. These are also the founders of the company that was started in2020. The start-up capital was NOK 1,000,000, and the four owners paid in NOK 250,000 each. 100,000 shares were issued at NOK 10 per share. Nocta produces an electronic

measuring device that increases the production capacity of offshore wind turbines. A prototype of

this electronic measuring device has been manufactured and tested. The result of the test has

resulted in Nocta receiving a patent for the product from 01.01.2022 to 31.12.2025. Nocta gets

NOK 5,000,000 in support from Innovation Norway to start production of the electronic

the measuring device because it contributes to increased production of green energy.

 

ii) In 2022, Nocta will produce and sell 2,000 units of the product, and sales price per unit

is 5,000 kroner. Variable costs are NOK 2,000 per unit, fixed costs are

NOK 2,000,000 per year. In the next 3 years, it is likely that production will increase

by 12% per year. The sales price per unit will be NOK 5,000 for all 4 years. Fast

and variable costs will also increase by 12% per year. The working capital requirement is 10% of

next year's sales. The cost of capital is 15%.

Assume that the entrepreneurs' investment of 1,000,000 kroner has been agreed to make

the prototype, also assume that the support from Innovation Norway covers the investment that

must be done in 2021 plus the working capital requirement this year. Since the patent expires in

2025, entrepreneurs are uncertain about the cash flow after this year because they assume that

then many competitors enter the market. They therefore expect a service life of 4

year. The tax rate is 30%.

What is the value (present value) of the company in 2021?