XYZ Inc is seeking an investment of $67,000 from your venture capital firm

Finance Dec 03, 2020

XYZ Inc is seeking an investment of $67,000 from your venture capital firm. After extensive economic analysis, you estimate that the exit value of the company will be $340,000 6 years from now. Because of the risk, you will only invest if you can generate of return of 8% per year on your investment. The founders want to have 100,000 shares of the company. What is the PRE-money valuation of the company?

Expert Solution

PRE-money valuation of the company = Present value of exit value

PRE-money valuation of the company = 340,000/1.08⁶

PRE-money valuation of the company = 214,258

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