the terminal value relate to the future value of

the terminal value relate to the future value of

the terminal value relate to the future value of Refer to the FrothySlope microbrewery example at the beginning of this chapter.a) How does the $500,000 piece of the terminal value relate to the future value of the $100,000? This is, the brewpub investor was looking for a 40% return. The five-year-out future value of $100,000 growing at 40% is 100,000*(1.4)^5=$537,824, slightly more than % 500,000. Does this mean the investor is not really expected to make 40% on the $100,000, even though we used that discount rate to arrive at the initial $5,856,935 valuation? (Hint: What about explicit forecast period flows?)b) Returning to the brewpub spreadsheet with all flows included, how much more of the venture’s ownership of surplus cash flows would have to be sold for $100,000 if the investor expected to make 70% (given Jim’s utopian vision of his future)?c) What percentage of the brewpub’s present value is contained in the present value of the terminal value (the venture’s “reversion value”)?d) How much ownership of the brewpub cash flows would need to be sold to an investor demanding 40% but agreeing that the mature brewpub venture would terminally grow at a rate of 8% with a risk profile requiring a discount rate 18%? (the spread between the discount rate and the growth rate is sometimes referred to as the “capitalization rate” for the terminal flows or just he “cap rate.”)Information on FrothySlope is in the attached file

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