Valuation of a Start-up in a BRIC country

Hello,

On the first I would like to know which is the best method to value a Start-up (DCF, multiples, etc)? How would you do it?

On the other hand I have been struggling to get the best way to value a Marketing Consulting firm (start-up) that is already being profitable in Brazil. I think DCF is a good choice as using multiples is kind of difficult because the firms you would to compare with this start-up would be much larger and results might not be reliable. In the case we stick to the DCF model I am doubting about the Cost of Capital.

1) COST OF EQUITY: I know of the existence of several methods to calculate the Ke in risky markets like the Lessard, Godfrey, Goldman Sachs, I guess those are the most complete ones but also too complicated to apply, what do you think? In my case I used the CAPM model:

a) RISK FREE RATE: I have looked for Brazilian government bond rate from Damadoran's (Proffessor at the NYU) tables:

http://pages.stern.nyu.edu/~%20adamodar/ (Section: Country Default Spreads and Risk Premiums)

But then here there are two different data: Sovereign Rating based Equity Risk Premiums and Sovereign CDS based Equity Risk Premium; which one is the most appropriate?

b) BETA: I have used the advertising unlevered beta from the "Levered and Unlevered Betas by Industry of Emerging Marktets" section of the same website.

c) MRP: Returns from Brazilian stock exchange market - Brazilian government bonds return?

2) COST OF DEBT: I guess it should be composed of the risk-free rate and a credit risk premium, which should the be the Credit risk premium? or it would be better to follow a more simple way adding up all the Interest paid last year and dividing them by the amount of debt outstanding?

Thank you very much for your time!

 

Beatae est sed qui voluptate. Doloribus asperiores dolorem facere culpa ducimus dolor. Recusandae labore commodi qui beatae iure optio dicta. Sed autem et ut repellendus aut quas. Sit iure illum vel sed quia.

Career Advancement Opportunities

April 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. New 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

April 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

April 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

April 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (87) $260
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”