1 What is the utopian value of Jim’s venture? Provide all details of your calculations.

2 What is the P/E multiple utopian value of Jim’s venture? Provide all details of your calculations.

3 What is the First Chicago discounted cash flow value of Jim’s venture? Provide all details of your calculations.

4 Bill would like to invest $300,000 in Jim’s venture. What percentage of ownership should he ask for and why? Provide all details of your calculations.

5 How would the venture’s value change if Jim initially invested $200,000? Provide all details of your calculations. 

Initially Jim invested $150,000 in his startup. He provides us with his best guesses for what his venture would be left over after all operating expenses and reinvestments in the first five years: Optimistic Scenario: $0 this year, $0 next year, $1,000,000 the third year, and $3,000,000 the fourth year. In the fifth year, Jim believes that the venture would mature and have the net income of $5,000,000 and valuation cash flow of $4,500,000, which would be expected to grow at 10 percent per year. Pessimistic Scenario: $0 this year, $0 next year, $0 the third year, and $1,000,000 the fourth year. In the fifth year, Jim believes that the venture would mature and have the net income of $2,000,000 and valuation cash flow of $1,500,000, which would be expected to grow at 5 percent per year. We know that in this industry 20 percent of new venture do not survive after first four years, and only 10 percent become venture utopias. The P/E multiple for this industry is 12.