Would the price earnings ratio valuation method

Reference no: EM133269706

Question - Company A is a high-tech start-up company that produces Artificial Intelligence software that can help companies fine-tune their digital marketing campaigns to bring in more results. After two years of developing the software, Company A has just completed one full year of software sales on a commercial basis. Both profits and cash flows just barely turned positive as the company is only beginning to gain traction, and revenue is still tiny. The management of Company A is optimistic that income and profits will grow exponentially in the next few years.

Company A is at the point where more capital is needed to fund its growth. It has begun talks with a Venture Capital company, which suggests that they would value the company based on the Price Earnings (PE) ratio multiplied by its latest historical Net Income. It is willing to be generous in valuing Company A at the same PE as similar listed companies.

CEO of Company A , however, felt that perhaps the company could get a better valuation if they were to base it on a discounted cash flow method, valuing Company A's cash flows in the coming years.

Would the Price Earnings ratio valuation method or the discounted cash flow method be a better valuation method in this case?

Reference no: EM133269706

Questions Cloud

Procurement to pay process : Starting from the SOW for procurement, requirement analysis, Supplier selection, contracts/RFQ's, receiving items (Controlling / monitoring) to payments

Compare and contrast the organizational structure : Compare and contrast the organizational structure and operations of the US Federal Reserve and the European Central Bank

Algorithm for performing operation : When the successor is the left child of the node to be deleted. What are the steps followed by algorithm for performing this operation.

Keep track of shipping information : This application is used to keep track of shipping information. A company has many stores across Canada, and ships items from their main warehouse in Toronto to

Would the price earnings ratio valuation method : Would the Price Earnings ratio valuation method or the discounted cash flow method be a better valuation method in this case

Summary of the external pest analysis : Q.1) Provide a summary of what SWOT analysis is, and what it is designed to achieve.

Provide your arguments for and against investing : ACCT 2030 George Brown College Canada relation to the future of the company and its staffing. Provide your arguments for and against investing in this company

Problem based on the competitive advantage framework : Based on the Competitive Advantage Framework, explain the dominance and high probability of the big four banks in the Australian banking industry.

Find the 3 participants that got the highest scores in test : 6) Find the 3 participants that got the highest scores in test1. Display the result in descending order,

User Account

All Pages