Determine the value the start-up company

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You are asked to value a small start-up company that is expected to generate a (negative) cash flow of - $10 million next year, and - $5 million in the following year (year 2), before the firm turns profitable in year 3. Its first positive cash flow (in year 3) is equal to $2 million, and cash flows are expected to grow at a rate of 20% per year for 7 years (until year 10). After year 10, the growth rate drops to 5% indefinitely. Determine the value the start-up company if the relevant discount rate is equal to 8%.

Reference no: EM132074932

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