| Topic Name: |
vc valuation |
| Message Name: |
Re: geez |
| Date Posted: |
04/02/2002 |
| In Reply To: |
how did you get hired?
it doesn't matter how much of the co you want to buy now - your irr is going to depend on what you put in and how much you get out.
here's how to think about it...if it's 3.5M now, what's it going to be worth in 5 years, so that it gets you to a 30% IRR. IRR is closely related to NPV.
NPV = E (values i/1 + rate^i)
IRR is rate corresponding to NPV = 0.
so to get IRR:
0 = (% of 3.5M/1 + IRR^i)
you need to go to a bb and sell your soul, like i did. |
| Message: |
How did YOU get hired??
1) NPV = SUM over i's(cash return at end of year i / [(1 + rate)^ i])
The discount factor is not (1 + rate^i)
2) Your formulation for IRR doesn't yield any solutions except for % = 0.
To get IRR for a one-time cash return on investment you solve:
{exit multiple of money / [(1+ IRR)^i]} = initial investment principal
You don't need to go to a bb to learn first order valuation metrics. IRR and NPV are covered in the first 2 chapters of any corporate finance text.
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