Questions-Ch5-answers.pdf

Q1. What is a typical approach used to value high growth companies? A. DCF B. DCF and probability-weighted scenarios C. APV D. APV and probability-weighted scenarios E. Comparables Q2. Which statement is not correct? A. High-growth companies are normally defined as those whose organic revenue growth...

Q1. What is a typical approach used to value high growth companies? A. DCF B. DCF and probability-weighted scenarios C. APV D. APV and probability-weighted scenarios E. Comparables Q2. Which statement is not correct? A. High-growth companies are normally defined as those whose organic revenue growth exceeds 15% annually B. High-growth companies can be defined as those whose return on equity exceeds 15% annually C. Since most high-growth companies are start-ups, stable economics lie 3 to 5 years in the future. D. There is no single method that fits all firms when projecting revenues. E. Historical financial performance for high-growth companies is often misleading, because long-term investments for high-growth companies tend to be intangible. Q3. A venture plans to issue additional 25% of the total number of shares outstanding. What is the retention ratio for the current investors? A. 0.25 B. 0.75 C. 0.8 D. 1 E. 1.25 Q4. Order Venture capital method valuation steps: I. II. III. IV. Current Percentage Ownership Terminal Value Final Percentage Ownership Discounted Terminal Value A. I, II, III, IV B. II, IV, I, III C. IV, III, II, I D. II, IV, III, I E. None of the above