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Homework answers / question archive / You recently joined a prestigious venture capital firm in Munich
You recently joined a prestigious venture capital firm in Munich. As one of your first tasks, you should analyze the performance of the following mutually exclusive investment opportunities by investigating the net present value (NPV) of each company.
The companies are entirely equity-financed, and the cost of equity capital for the start-up companies is at 15.42% (Assume for the sake of simplicity that all start-ups are equally risky). The cash flow projections for the different start-ups are as follows (Mn. €):
| Year | 0 | 1 | 2 | 3 | 4 |
| Company A | - 10.00 | 50.00 | 200.00 | 230.00 | 125.00 |
| Company B | - 15.00 | 20.00 | 150.00 | 200.00 | 300.00 |
| Company C | -20.00 | 5.00 | 10.00 | 20.00 | 35.00 |
1q.What are the discount factors in year 3 and year 4?
2q. What are the net present values (NPV ->Year 0) of Company A and Company B?
3q. Now assume that the cash flows of company C will grow after the explicit forecast period (year 1 to year 4) by 8.33% from year five (5) until infinity.
What is the net present value (NPV) of project C?
p.s only answers without steps
