Hi,
I have a problem and can not figure out that if there is a solution (mathematically possible) or not. I tried to demonstrate the problem below. I have tried so many things (goal seek, solver or analytical approaches) but could not find a solution. Now I am thinking that there is no solution for this problem.
Here is the issue;
I am trying to find an "a" value that satisfies above mentioned conditions and assumptions but lost my hopes. There may not be a valid solution for "a" value.
Thanks in advance.
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I have a problem and can not figure out that if there is a solution (mathematically possible) or not. I tried to demonstrate the problem below. I have tried so many things (goal seek, solver or analytical approaches) but could not find a solution. Now I am thinking that there is no solution for this problem.
Here is the issue;
- There are two different companies, say Comp. A and Comp. B.
- These companies will make an investment together and their shares are 40% and 60% respectively.
- Total investment amount is 100$.
- Payments from companies for investment will be made in year 0.
- The investment will generate a fixed revenue (in the example fixed revenue named as "a") for 3 years and this revenue will be shared by companies based on their shares in the investment. Since Comp. A will exit in this partnership at the end of Year 2, 40% - 60% for first 2 years and 0% - 100% for Year 3 respectively).
- These companies have different return expectations which results in different IRRs (internal rate of return).
- The payment will be derived from their IRR expectations.
I am trying to find an "a" value that satisfies above mentioned conditions and assumptions but lost my hopes. There may not be a valid solution for "a" value.
Thanks in advance.
Fixed revenue | a$ | Year 0 | Year 1 | Year 2 | Year 3 | |||
Cash flows | -100$ | a | a | a | ||||
Exit in... | Return expectation (IRR) | Share in investment | ||||||
Comp. A | Year 2 | 10% | 40% | -40$ | a x 40% | a x 40% | - | |
Comp. B | Year 3 | 12% | 60% | -60$ | a x 60% | a x 60% | a |
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