Okay, here we will do some valuation practice. In practice one company A is considering the acquisition of a smaller competitor Z. Z is expected to generate a constant perpetual annual cash flows of three million dollars from next year onwards. How much should A pay to buy the company Z when the company's discount rate (cost of capital) is 15 percent? The solution is here. So, we know that the present value of a perpetual cash flow is c over d, where c is the annual cash flow, and d is our cost of capital. So in this case, the present value is three million divided by 15 percent, so it is $20 million. So, the company A should pay less than $20 million when buying company Z. So, in practice two your company is considering a new project. If you invest one million dollars in year 2019, the following free cash flow is expected. So, in year 2020; $50,000, and it'll increase to $400,000 in year 2024. From year 2025, perpetual annual free cash flow of 400,000 is expected. Estimate the residual value after 2025. Assume that the discount rate (cost of capital) is 10 percent. What is the present value of future cash flow? Estimate the net present value. So, the residual value in year 2024 is again the present value of the perpetual cash flow, so that's 400,000 divided by 10 percent of the cost of capital, so it's four million dollars in year 2024. Present value will look like this, and the last one is the residual value discounted for five years. The sum will be $3.215 million. Net present value will be the present value minus initial investment money of one million dollars, so it'll be $2.215 million. So, this is a good project to invest. In practice three, you are considering buying a startup X. The P/E ratios of public companies in this industry are shown here. So, there companies A-E and average P/E ratio is 19.4. So, if EPS (earning per share) for this company X is one dollar, what is the adequate share price? If the company has one million shares, how much would you pay for X? The share price should be one dollar times 19.4 which is the average P/E ratio in this industry, so the share price should be $19.4, and the company value should be $19.4 million. So, you should pay less than $19.4 million. This concludes finance for startups. I hope this course has helped you feel more comfortable about financial matters for yourselves. If you have any questions about this course please feel free to contact me using my email address here. I wish you the very best on your future endeavor.