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Technology Report:An Innovative Approach to Determining a Company's Value
This model provides an opportunity for early stage companies, yet to achieve their full potential, to assign value to their inherent intangible "knowledge" assets as they pertain to their future revenue and earnings projections. The Key West quantitative analysis accounts for the probably of achieving those results and discounts the projected revenues, along with traditional discounts for things like liquidity, and earnings quantitatively to estimate a company’s NPV of it probable market value at the end of some arbitrary period. Following is an illustration of the Key West risk analysis curve.
This documents is in Adobe Acrobat (pdf) format. To download the reader, click here. Click the spreadsheet below for an enlargement:
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This report describes an innovative approach for estimating a company's pro forma market value based on the discounted Net Present Value (NPV) of its earnings over a period of interest. Key West has developed a set of proprietary equations and an historical trend curve that yields an overall qualitative risk factor for the company achieving its pro forma earnings. The Key West historical trend curve, developed from actual historical venture performance, provides a quantitative method for evaluating the risk of a company not being able to achieve its projected results. The curve evaluates the cumulative impact of the individual parameters and assumptions that drive the company’s projected revenues. A small number of high risk assumptions can result in a significant overall risk factor as can a large number of lower risk assumptions. The resultant risk factor is translated into an element of the discount used in the NPV calculation of the company’s earnings over period of interest.
"click" to download the complete Key West Company Valuation Paper"