Westcliff University Economics - A venture investor wants to estimate

Description

Describe the following terms from the perspective of venture performance: black hole, living dead, and venture utopia. In what sense is the typical business plan utopian?

A venture investor wants to estimate the value of a venture. The venture is not expected to produce any free cash flows until the end of Year 6 when the cash flow is estimated at $2,000,000 and is expected to grow at a 7% annual rate into the future.

Estimate the terminal value of the venture at the end of Year 5 if the discount rate at that time is 20%.

Determine the present value of the venture at Year 0 if the venture investor wants a 40% annual rate of return on the investment.

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.

Estimate the value of the new venture at the end of Year 5.

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