Geary Technology is a young start up, entirely owned by its founder. You believe that the company will grow over the next two years and then be able to attract venture capital investors and that it will go public at the end of year 5. You have estimated the free cash flows to the firm (& equity) each year. The firm is all equity funded and the unlevered beta (of publicly traded firms) is 0.80. The founder is completely undiversified, the venture capitalists are partially diversified and you can assume that market investors in the IPO are fully diversified. (The risk free rate is 3% and the equity risk premium is 5%) Year 1 2 3 4 5 Beyond Free Cash flow to equity(in millions) Marginal investors Correlation with market -150 -50 150 250 400 Grows 3% Founder Founder VC VC VC Public 0.25 0.25 0.5 0.5 0.5 1 Estimate the value of the equity in this business, assuming that it stays fully equity funded in perpetuity.