Your friend has approached you with a business venture and is asking if you would like to become a limited partner. She believes the business would run for four years and then she would sell it. She is asking you to invest $39,000 today and an additional $10,000 at the end of the first year . The investment would return $12,000 annually at the beginning of each year and a bonus of $5,000 at the beginning of the fourth year. Given the riskiness of the venture you expect a return of 7% compounded annually . Should you make this investment?
a. What is the r value you will use in your calculations?
b. What formula(s) will you use in your calculations? Identify them by name, no need to write out the formula
c. What is the current value of your total investment?
d. What is the current value of your expected dollar returns?
e. Is the venture worth pursuing? Justify your answer using calculations to provide quantitative proof .
