Chapter 10 #3 pp. 382 – 3833. [Venture Capital Valuation Method] A venture capitalist wants to estimate the value of a new venture. The venture is not expected to produce net income or earnings until the end of year 5 when the net income is estimated at $1,600,000. A publicly-traded competitor or “comparable firm” has current earnings of $1,000,000 and a market capitalization value of $10,000,000.A. Estimate the value of the new venture at the end of year 5. Show your answer using both the direct comparison method and the direct capitalization method. What assumption are you making when using the current price-to-earning relationship for the comparable firm?Chapter 11: Discussion Questions: #8, #9, #10, #12, and #15 p. 428
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8. Who are the major suppliers of venture capital by type and size of commitment?12. Why do venture capitalists make quick decisions on the infeasibility of some business plans?When a business plan is not quickly determined to be infeasible, what happens next and why?15. Why are venture capital funds typically organized as limited partnerships? In particular, why are they private firms instead of public firms?Chapter 11: Interact Systems Mini Case: p. 430Interact Systems, Inc. has developed software tools that help hotel chains solve application integration problems. Interact’s Application Integration Server (AIS) provides a two-way interface between central reservations systems (CRS) and property management systems (PMS). At least two important trends in the hotel industry are relevant. First, hotels are shifting away from the manual booking of room reservations and electronic bookings will continue to increase as more bookings are made over the Internet. Second, competitive pressures are forcing hotels to implement yield management programs and to increase customer service. By integrating the CRS and PMS through Interact’s AIS, inventories can be better managed, yields improved, and customer service enhanced.
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