User Account

All Pages

Estimate the value of the new venture at the end of year 5

Assignment Help Finance Basics
Reference no: EM131124276

A venture capitalist wants to estimate the value of a new venture. The venture is not expected to produce net income or earnings until the end of Year 5 when the net income is estimated at $1,600,000. A publicly traded competitor or "comparable firm" has current earnings of $1,000,000 and a market capitalization value of $10,000,000.

A. Estimate the value of the new venture at the end of Year 5. Show your answer using both the direct comparison method and the direct capitalization method. What assumption are you making when using the current price-to-earning relationship for the comparable firm?

B. Estimate the present value of the venture at the end of Year 0 if the venture capitalist wants a 40 percent annual rate of return on the investment.

Reference no: EM131124276

Questions Cloud

Interpret your results as they relate to the founders owner : Rework the two-stage example of Section 10.5 with first- and second-round required returns of 55 percent and 40 percent (instead of the original 50 percent and 25 percent). Interpret your results as they relate to the founders’ ownership and the feas..
Rework the two-stage example of section 10 : Rework the two-stage example of Section 10.5 with 1,000,000 initial founders’ shares (instead of the original 2,000,000 shares). What changes?
What is the equally weighted average annualized return : Assuming no intermediate flows before the terminal payoff, verify that the associated annualized rates are −42.55 percent, 8.45 percent, and 19.35 percent. What is the equally weighted average annualized return? Does it make sense to use this as a si..
What annualized return is embedded in its anticipation : Assuming it is a seed-stage firm with no existing investors, what annualized return is embedded in its anticipation?  Suppose the founder wants to have a venture investor inject $15 million in three rounds of $5 million at times 0, 1, and 2 with a ti..
Estimate the value of the new venture at the end of year 5 : Estimate the value of the new venture at the end of Year 5. Show your answer using both the direct comparison method and the direct capitalization method. What assumption are you making when using the current price-to-earning relationship for the com..
Determine the present value of the venture at the endof year : Estimate the terminal value of the venture at the end of Year 5 if the discount rate at that time is 20 percent. Determine the present value of the venture at the end of Year 0 if the venture investor wants a 40 percent annual rate of return on the i..
Calculate the discount rate consistent with a cap rate : Calculate the discount rate consistent with a cap rate of 12 percent and a growth rate of 6 percent. Show how your answer would change if the cap rate dropped to 10 percent while the growth rate declined to 5 percent.
What ingredients would you need to conduct a vcsc valuation : From the Headlines—Excaliard: What ingredients would you need to conduct a VCSC valuation for Excaliard? Does your calculation suggest that a $15.5 million Series A round is reasonable?
Discuss the type of data and the procedural changes : Discuss the type of data and the procedural changes necessary to implement a five-scenario expected PV valuation for a venture investment.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the dupont formula

What is the DuPont formula? What does an increase in the number of days' sales in receivables ordinarily indicate about the credit and collection policy of the firm?

  Finding the value of missing cash flow

The present value of the following cash flow stream is $6,785 when discounted at 10 percent annually. Find the value of the missing cash flow?

  Dallas interiors has a cost of equity of 186 percent and a

dallas interiors has a cost of equity of 18.6 percent and a pre-tax cost of debt of 9.7 percent. the firms target

  Last year clark company issued a 10-year 12 percent

last year clark company issued a 10-year 12 percent semiannual coupon bond at its par value of 1000. the bond can be

  What is the effective borrowing cost

What is the APR on this loan? c) What is the effective borrowing cost if the borrower anticipates paying off the loan at the end of five years?

  Which is the effective annual rate

Your auto finance company is quoting you an Annual Percentage Rate (APR) of 8%. You are borrowing $45,000 and the payment is $845 per month. You will make monthly payments. Which is the Effective Annual Rate (EAR)?

  Which item is found on the balance sheet

Which item is found on the balance sheet? Give an explanation to the answer.

  Compute the cash flow

Gerry Co. has a gross profit of $980,000 and $390,000 in depreciation expense. Selling and administrative expense is $127,000. Given that the tax rate is 32 percent, compute the cash flow for Gerry Co. A. $707,340 B. $590,000 C. $704,840 D. $126,9..

  What would be the tax effect on the sale

Answer $3,400 tax loss form a capital gain. $1,000 tax payment from depreciation recapture. $600 tax payment from depreciation recapture. $1,000 tax gain from capital loss.

  Q the issued capital of indiana ltdcomprises of 100000

q the issued capital of indiana ltd.comprises of 100000 ordinary shares of rs. 100 each. it has no fixed interest

  Review concept of a industry-wide private industrial network

Why is Elemica described as an example of an industry consortia net marketplace? How does it differ from other types of net marketplaces like ChemConnect?

  What are multinational corporations mnc

What are multinational corporations (MNCs) and what economic roles do they play?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd