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 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. Estimate the present value at the end of year 0 if the venture capitalist wants a 40% annual rate of return on the investment.