AJ Partners is a private equity investor which makes a $5 million investment in a venture...

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AJ Partners is a private equity investor which makes a $5 million investment in a venture capital firm today. AJ Partners expects to sell the firm in six years and believes there are three equally possible scenarios at termination: 1. expected earnings will be $20 million, and the expected P/E will be 10. 2. expected earnings will be $7 million, and the expected P/E will be 6. 3. expected earnings will be zero if the firm fails. AJ Partners believes an IRR of 35% is appropriate. Calculate (0) (ii) The expected terminal value The pre-money and post-money valuation The PE firm's fractional ownership in the venture capital firm AJ Partners is a private equity investor which makes a $5 million investment in a venture capital firm today. AJ Partners expects to sell the firm in six years and believes there are three equally possible scenarios at termination: 1. expected earnings will be $20 million, and the expected P/E will be 10. 2. expected earnings will be $7 million, and the expected P/E will be 6. 3. expected earnings will be zero if the firm fails. AJ Partners believes an IRR of 35% is appropriate. Calculate (0) (ii) The expected terminal value The pre-money and post-money valuation The PE firm's fractional ownership in the venture capital firm

Answer rating: 100% (QA)

To calculate the expected terminal value we need to find the expected earnings in each scenario and ... View the full answer