Table $1$

Multiple of Earnings Method. To use this approach you first determine a company's projected average annual earnings. If historical income statements are available and it is believed that the past will be indicative of the future, then use the average earnings for a two to five year period as the company's projected annual earnings. Next, find the price$-$to$-$earnings ratios $(PE$ ratios$)$ of public companies and recently sold private companies that are in the same industry and are similar in size to the firm being valued. Based on comparisons of the company being valued and the public companies, judgment is used to establish the P$/$E ratio to apply to the company's earnings. For example, suppose a company averaged $$200000$ in net income for the last three years and a P$/$E of $5$ was deemed appropriate. The value of the company's equity would be $5($$$200000)=$$$1,000,000.$ Use the multiple of earnings method to estimate the value of AFC's equity. As a first pass, use the average projected earnings over the first five years as the best estimate of earnings. Then assume the stock of publicly traded firms with somewhat similar technologies sells at an average of eight times earnings. Case $18$: Advanced Fuels Corporation: Directed Table $1$ Current Balance Sheet and New Capital Requirement Current Balance Sheet Cash Patent Total Assets Accounts Payable Loans from friends and relatives Total Liabilities Common Stock Additional paidin capital Total Liabilities and Equities Total Liabilities and Equities $$401,000$ Capital Required For Venture $($In Millions$)$

Current Balance Sheet and New Capital Requirement

$\backslash$table$[[$Current Balance Sheet,,$\backslash$table$[[$Capital Required For Venture$],[($In Millions$)]]],[$Cash$,$$$1,000,$Purchase of Equipment$],[$Patent$,400,000,$Purchase of Land$],[$Total Assets,$$401,{000}_{?},\backslash$table$[[$Construction$],[$Working capital$]]],[$Accounts Payable,$$1,000,$Total requirement$],[\backslash$table$[[$Loans from friends$],[$and relatives$]],250,000,],[$Total Liabilities,$$251,000,],[$Common Stock,$100,],[$Additional paid$-$in capital,$149,900,]]$

Total Liabilities and Equities $,$$$401,000$