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Valuation: Measuring and Managing the Value of Companies, Fifth Edition
Chapter 34 Solutions
Valuing High-Growth Companies
1. The DCF method is still preferred and the basic inputs are the same for a high-growth
company as for an established company. In the mature markets, the analysis begins with
historical performance and then forecasts forward. In the high-growth company, however,
2. The total market includes all possible clients that could possibly have use for the product
or service. For a firm that offers reservation-taking services to restaurants, according to
3. Estimating market share requires a number of inputs such as the size of the market, the
level of competition from similar products already being marketed, and the degree to
4. Estimating potential margin requires a triangulation between internal cost projections and
operating margins for established players. The estimation process for capital turnover
would use an estimate of current turnover, which is calibrated to values of established
5. Because many investments for a new, high-growth firm are intangible, accounting
6. The stock did not have to be mispriced. The comparatively low price a year earlier could
have been from a combination of (1) the expected present value of cash flows that was
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