Question

Part B. In clear terms explain why knowledge of valuation is vital in entrepreneurial finance. In your response, make sure to answer the question from the points of view of: (20 points)

1. Entrepreneurs;

2. Investors
3. Future Team Members in a venture

Answer 1

Knowledge of valuation is vital in entrepreneurial finance for the following

1. Entrepreneurs - They require valuation of the firm to get information about the value of the firm they are working in. This value will help them if they need to sell, merge there firm or acquire with some other firm. Also, they need valuation when they need to launch an IPO in the stock market.

2. Investor - They require the valuation of the firm to understand the firm they are investing in. Whether the firm they are investing is undervalued or overvalued, how much returns will there investment will pay in the future.

3. Future Team Member in a Venture - They guide the direction of the firm, which makes or breaks the firm but that cant be done by a single member so members have to understand the working environment in the firm, colleagues with whom they are working, future of the firm such that it grows and helps future of team member grows.