$[$Venture Capital Valuation Method$]$ A venture capitalist wants to estimate the value of a new venture. The venture is not expected to produce net income or earnings until the end of Year $5$ when the net income is estimated at $$1,600,000.$ A publicly traded competitor or $$comparable firm$$ has current earnings of $$1,000,000$ and a market capitalization value of $$10,000,000.$

A$.$ Estimate the value of the new venture at the end of Year $5.$ Show your answer using both the direct comparison method and the direct capitalization method. What assumption are you making when using the current price$-$to$-$earning relationship for the comparable firm?

B$.$ Estimate the present value of the venture at the end of Year $0$ if the venture capitalist wants a $40$ percent annual rate of return on the investment