Ogden Chapter 11

Chapter(11( Why(many(ventures(fail?( 5 Speculate(on(new(frontiers(in(a(particular(industry(!(e.g.(create(new(markets((can(fail(if( there(is(no(demand(for(a(certain(product(or(service)( 5 Inexperienced(management(and(lack(of(financial(means( 5 Due(to(lack(of(financial(means(it(reacts(more(sensitive(to(macroeconomic(changes(( Where(to(obtain(funding?( 5 Banks(do(not(offer(loans(to(ventures(in(early(phase(of(the(development(!(too(risky(( o Wealthy(individuals(!(business(angels( o Governments(and(universities( o Venture(capital(firms( How(to(value(a(venture?( 5 Cannot(work(with(past(earnings(to(forecast(future(cash5flows(as(it(is(a(start5up(and(has(no( past(earnings( 5 Cannot(rely(on(earnings(of(other(companies(in(the(industry,(as(ventures(either(try(to(create(a( new(market(and(their(might(be(no(other(companies(acting(in(that(market(or(there(are(only(a( few(comparable(companies((when(ventures(operate(in(a(young(industry)(!(makes( establishment(of(a(rational(discount(rate (also(problematic(( 1.

Set(future(date((horizon(date)(when(the(venture(is(expected(to(be(a(stable(and(profitable( firm((firms(long5term(business(goals(are(achieved)(and(forecast(the(ventures(earnings(and( earnings(growth(from(that(date(onwards.((( 2. Use(expected(market5to5book(ratio(or(P/E(ratio(to(calculate(the(value(of(the(firm(at(horizon5 date( 3. Calculate(the(current(value(of(the(venture(by(discounting(the(calculated(horizon5date(value( of(the(firm(to(the(present(by(use(of(an(appropriate(risk5adjusted(discount(rate(!(50%570%( for(early(stage(venture,(depending(on(the(probability(of(ventures(success,(length(of(tim e(to( horizon(date,(current(interest(rates,! (risk(premium(in(the(market(( 4. Use(the(estimated(present(value(to(partition(shares(among(firms(entrepreneurs(and( investors((If you want to get a full essay, order it on our website: OrderCustomPaper.com

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