Develop an estimate of the value of websmart and explain

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Business Valuation

WebSmart is a relatively new Internet company that sells educational products on the Web. The firm focuses on students preparing for college entrance exams. The key competitive advantage at WebSmart is its highly regarded publication, Guide to Competitive Colleges, which is sold widely in bookstores and on Amazon.com. The firm has grown rapidly and now is seeking additional venture capital investment to allow it to improve its operations and provide additional advertising and promotion. One of the venture capital firms that WebSmart approached has asked WebSmart to provide an estimate of the firm's value. Relevant finan- cial information about WebSmart from the most recent financial statement follows. WebSmart owns no significant fixed assets, but operates out of leased space. WebSmart management knows that the median stock price-to-sales multiple in the industry is approximately 7.

Total assets per most recent financial statement

$1,450,000

Total book value of equity, per most recent financial statements

1,200,000

Estimated market value of Guide to Competitive Colleges

1,350,000

Net income

(85,000)

Cash flow from operations

(165,000)

Total revenues

$600,000

Required Develop an estimate of the value of WebSmart and explain your reasoning.

Reference no: EM13874965

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