Valuation

Question 1

What are the main Valuation methods and how do they work?

Answer 1

1. Venture Capital Model
2. Discounted Cash Flow Method
   (TV = (1+g)/(d-g)*FCF_T)
3. Investment Comparables
4. Exit Comparables

Question 2

What types of risk are included in the required rate of return? How do you estimate each component?

Answer 2

RRR = riskless rate + financial risk + illiquidity risk + failure risk + service premium

Financial risk is given by the CAPM model
Required rate = riskless rate + beta*(market risk - riskless rate)

failure risk = probability of failure.
rho = (d+z)/(1-z)

Question 3

How can we model uncertainty? List the different methods and explain how they work.

Answer 3

Probabilistic Scenario Analysis, Simulations, PROFEX.