Consider a start-up requiring $4,000 initial funding Furthermore, assume that a VC estimates the firm...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Consider a start-up requiring $4,000 initial funding Furthermore, assume that a VC estimates the firm would yield the following cash flows with probability p = 0.8 and 1 - p = 0.2, respectively.
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flow | -4,000 | ||||
| p = 0.8 | 480 | 480 | 480 | 4,000 | |
| 1 - p = 0.2 | 480 | 480 | 480 | 100,000 | |
| Expected cash flow | -4,000 |
What percentage of equity would the VC demand in a simple common stock capitalization in order to attain an expected IRR = 35%?
Group of answer choices
83 percent
75 percent
46 percent
67 percent
51 percent
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Best
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.