The following table provides the annual profits of two startup tech firms along with their present value of profits calculated at an interest rate of 5 percent. Which firm would be your recommendation for an acquisition? Explain. Year Firm A Profits Firm B Profits 1 $1,000,000 $5,000,000 2 $1,200,000 $2,000,000 3 $1,400,000 ($800,000) 4 $1,500,000 $500,000 5 $1,600,000 ($100,000) PV $5,737,885 $6,217,892
The following table provides the annual profits of two startup tech firms along with their present value of profits calculated at an interest rate of 5 percent. Which firm would be your recommendation for an acquisition? Explain. Year Firm A Profits Firm B Profits 1 $1,000,000 $5,000,000 2 $1,200,000 $2,000,000 3 $1,400,000 ($800,000) 4 $1,500,000 $500,000 5 $1,600,000 ($100,000) PV $5,737,885 $6,217,892
Chapter15: Harvesting The Business Venture Investment
Section: Chapter Questions
Problem 1eM
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The following table provides the annual profits of two startup tech firms along with their present value of profits calculated at an interest rate of 5 percent. Which firm would be your recommendation for an acquisition? Explain.
Year | Firm A Profits |
Firm B Profits |
1 | $1,000,000 | $5,000,000 |
2 | $1,200,000 | $2,000,000 |
3 | $1,400,000 | ($800,000) |
4 | $1,500,000 | $500,000 |
5 | $1,600,000 | ($100,000) |
PV | $5,737,885 | $6,217,892 |
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