Question

XYZ Inc. is seeking an investment of $69,000 from your venture capital firm. After extensive economic...

XYZ Inc. is seeking an investment of $69,000 from your venture capital firm. After extensive economic analysis, you estimate that the exit value of the company will be $325,000 5 years from now. Because of the risk, you will only invest if you can generate of return of 9% per year on your investment. The founders want to have 100,000 shares of the company. What is the post-money valuation of the company? Round your answer to the nearest whole number, for example 50501.

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Answer #1

Post money valuation of the company is the value of the company if investment is made in the company.

After the investment is made, Value of the company after 5 years is expected to be 325000. With expected return of 9% on investment, we find the present value of company

PV = FV / (1+ R)^N

PV = 325000 / (1+9%)^5

= 325000/1.538624

= 211227.7

Hence the value of company post money valuation is 211228 (Rounding off to nearest whole number)

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