New venture disadvantage question

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What are the various valuation techniques and the disadvantages of each as it relates to valuing a new start-up venture?

Oct 15th, 2015

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There are following two valuation techniques:

Comparable multiples

P/E multiple

Market to Book multiple

Price to Revenue multiple

Enterprise value to EBIT multiple

Discounted Cash Flow (DCF)

NPV, IRR, or EVA based Methods

WACC method

APV method

CF to Equity method

The disadvantage of comparable methods is  that  To apply this method, we have to  look at comparable transactions in that industry paralleled to a business with a similar model and then compare them by the relevant ratios and multiples such as Enterprise Value-to-EBITDA..

The disadvantage of DCF method is that it relies on Weighted Average Cost of Capital (WACC) and The risk-free rate comes from the Treasury bond rate at the time where the projections are being considered.


Oct 15th, 2015

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