I believe the question was somewhere along the lines of: “Which method would be least suitable for valuing VC companies?” 1) Real Options 2) Replacement Cost (Cost Approach) 3) Multiples (Market Approach) The answer, I believe was Multiples because given VC firms are immature, they will not have any true comparable. Replacement cost is suitable for VC firms because they are new and the cost can be reliably measured. Real options are also suitable for VC firms as they have more “options” for future growth. 1 and 2 and used for VCs according to CFAI text. +1 bannisja, -1 sebrock (sorry)
ooh back in the plus column. nice.
TheAliMan Wrote: ------------------------------------------------------- > I believe the question was somewhere along the > lines of: > > “Which method would be least suitable for valuing > VC companies?” > > 1) Real Options > 2) Replacement Cost (Cost Approach) > 3) Multiples (Market Approach) > > The answer, I believe was Multiples because given > VC firms are immature, they will not have any true > comparable. Replacement cost is suitable for VC > firms because they are new and the cost can be > reliably measured. Real options are also suitable > for VC firms as they have more “options” for > future growth. > > > > 1 and 2 and used for VCs according to CFAI text. > +1 bannisja, -1 sebrock (sorry) yes sir.
Yeah Ali is right about this one too. I thought the question was fairly obvious as VC companies are start-ups, no public comps available so can’t use multiples approach.
so just last q- was it GP’s/LP’s report their own results?
I don’t even remember that question, sorry.
damn -1 for me but that makes no sense at all. Again, what is the replacement value of a young bill gates?
i got killed on private equity, 3/6 wrong
i was either 4 or 5/6 on it. will see aug 18th. econ was my smokeshow. i made the most stupid of mistakes. i’m ashamed of myself.
i put multiples, and yes Banni you are right with the GP or third party marking the book
5/6 then thank you alts. need it- have some huge holes to fill in econ/quant/pm.
whats the consensus on the IRR. I put 14. Did the calc using IRR on calculator. they said operating results were end of year and drawn down capital was beg of year so if you netted the end of year operating results with beg capital drawn you got 14. which was answer so I chose it. if correct 6/6, if wrong 5/6 for me only section i nailed, maybe those corp finance too…
CLT2 Wrote: ------------------------------------------------------- > Relative Valuation as in comparables. VC firms > typically have no comparable companies to use as > guideline companies for multiples. > > Yeah, replacement and real options are OK. > Relative Valuation is not. I thought the choices for this one were real options replacement cost earnings valuation… I chose C, earnings valuation and agree the first two methods are ok
so consensus is Earnings valuation not good for VC +1 for me IRR 12 or 14% – i think i am -1 on this - i guessed it and am not sure what i marked
AI 1) C (price mult) 2) Last fund (low mgmt fees/lower CI/higher hurdle) 3) Think it was A (Annual clawback one) 4) .75 rings a bell 5) This was the IRR question; guessed 12% 6) Think it was something about the GP or and indep values the firm Those are the answers I went with/can remember
This question really frustrated me. My firm values VC companies fairly often and we never use P/E multiples because they’re normally negative (we use revenue multiples instead), and it is pretty hard to run a meaningful NAV (replacement cost) on a start up company. Therefore, from a practical perspective, there were two options that I would never choose.
got the first 4 right then got bent over by the other 2… the 6th was def getable for me, I was easily able to eliminate A right away, but wasnt sure if it was time weighted return or money weighted
How did you work out .75? Anyone remember? I think PIC was 70 and distributions were 45. What else did you have to factor in to get .75?
It is because the total called down capital is 60k. it should be calculated as cumulative distributions over cumulative called down capital and not comitted capital.
Call me naive, but I don’t see how you can value a VC firm using price comps. I was under the impression VC was for a start up firm in a relatively new industry. I don’t know how it is done in the real world, but this one really busted my b@lls.