D 2 1 We want to value a private software firm using relative valuation. Assume the following: . . the average Price/Sales ratio for the software industry is 2 the average Price/Earnings ratio for the software industry is 5 ** If we know the private firm's sales are $3 million then the estimated value of this firm would be equal to ... [##] (1/2)*3 = $1.5 million 2-5*3 =$ 30 million If we know the pr 5*3 = $15 million .5 million then the estimated value of this 2'3 = $6 million firm would be equal to ... LAW 1 25 . We want to value a private software firm using relative valuation. Assume the following: . the average Price/Sales ratio for the software industry is 2 the average Price/Earnings ratio for the software industry is 5 ** If we know the private firm's sales are $3 million then the estimated value of this firm would be equal to .... (1) ** If we know the private firm's earnings are $1.5 million then the estimated value of this firm would be equal to .. () 5*1.5 = $7.5 million 21.5 $3 million 5*(1/1.5) = $3.33 million (1/5)*1.5 = $0.3 million