Option 2 is better for me (Spouse’s suggestion). Assuming I borrow money from them in the form of a mortgage of $200000, and I have to pay a prime plus 7 points, at the end of 4 th year I will have paid them less than what I would have paid them if they took 20% ownership of the business. I will pay them $620159.2 compounded quarterly and the principal of $200000, bringing the total to $26215.2 paid back at the end of the 4 th year. This is regardless of whether the business is making a profit or not, which might not be practical, but if the business model works out, this is the best option for me.
Secondly, for my friends, investing in the business will yield more profit for them. Assuming the business starts operating with 200000+ investing and we manage to make sales of $175000, $500000, $1000000 and &1500000 for the four years respectively. Also, we need to keep in mind that they were not present during the first year of the business, and we manage to make a 10% profit growth margin each year, which is used to calculate the amount of dividends they receive which brings us to a total of $42000 dividends paid ($6750, $13000, $21750 each year) which is not that high to raise for four years. And after selling the business at $1000000, which will be valued at $1428250 then, you have to pay them back $364237.5 (20% 0f 1000000+1428250). This is because they owned 20% of the business, and this brings a total of $406237.5, which is an excellent return to their investment.
Delegate your assignment to our experts and they will do the rest.
In my calculation, I have used simple interest and compound interest approach to calculate the values.
References
Johari, M., Hosseini-Motlagh, S. M., Nematollahi, M., Goh, M., & Ignatius, J. (2018). Bi-level credit period coordination for periodic review inventory system with price-credit dependent demand under time value of money. Transportation Research Part E: Logistics and Transportation Review , 114 , 270-291.
Chan, K., & Rate, E. A. I. (2019). & 6 The Time Value of Money. Financial Management .
Chakrabarty, R., Roy, T., & Chaudhuri, K. S. (2017). A production: inventory model for defective items with shortages incorporating inflation and time value of money. International Journal of Applied and Computational Mathematics , 3 (1), 195-212.
