Determine the value of the following firm. Identify the approach used.
Comapny X is expected to have earnings of 100 in the beggining in the 10th year - this is when it begins its earnings. The industry the company is in is expected to have a P/E ratio of 18 in 10 years.
a) What is the value of the firm today? Use a discount rate of 50%.
b) How much would a 25% share of this company cost today? (This is called the Vanture Capital Method)