Session 20_ Post-class test

3 assume that a young business has been valued at 40

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Unformatted text preview: multiple of earnings, high target rate of return. b. Low forecasted earnings, high multiple of earnings, high target rate of return. c. Low forecasted earnings, low multiple of earnings, low target rate of return. d. High forecasted earnings, low multiple of earnings, high target rate of return. e. High forecasted earnings, high multiple of earnings, high target rate of return. f. High forecasted earnings, high multiple of earnings, low target rate of return. 3. Assume that a young business has been valued at $40 million, using the VC approach. The venture capitalist will be investing $10 million in the company to cover investing and operating needs for the future. What proportion of the company should he get in return? a. 20.00% of the company b. 25.00% of the company c. 33.33% of the company 4. When venture capitalists invest in young companies, which of the following services do they generally provide? a. Supply capital to meet the company’s current needs b. Provide advice on operations and management c. Monitor the founder/managers of the company d. Facilitate access to other capital (debt and equity) e. Prepare for initial public offering or sale f. All of the above 5. The target rates of return demanded by VCs are much higher than the actual returns earned by VCs on their investments. Which of the following best explains the divergence? a. VCs consistently over value the companies that they invest in. b. VCs consistently under value the companies that they invest in. c. The earnings at young companies are generally much lower than initially projected...
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This note was uploaded on 10/10/2013 for the course ECON 304 taught by Professor Aswathdamodaran during the Spring '12 term at NYU.

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