Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A potential investor is seeking to invest $500,000 in a venture, which currently has 1,000,000 million shares held by its founders, and is targeting a

A potential investor is seeking to invest $500,000 in a venture, which currently has 1,000,000 million shares held by its founders, and is targeting a 50% return five years from now. The venture is expected to produce half a million dollars in EBITDA per year at year 5. It is known that a comparable venture recently produced $1million in EBITDA and went public for $10 million valuation. What is the value of the venture in year five using xComps (direct capitalization)?

The answer is 5mill, but I do not know how to get that. Please provide the work!

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Handbook Of The Economics Of Finance

Authors: George M. Constantinides, Milton Harris, Rene M. Stulz

1st Edition

044459406X, 978-0444594068

More Books

Students also viewed these Finance questions