1. Which of the following statements is FALSE?
1. The PE Ratio is determined by multiplying earnings by market share price.
2. Everything else being equal, the Price-Earnings (PE) Ratio will be larger for a high-growth firm.
3. The PE Ratio is often useful as a measure of relative value.
4. The PE Ratio is inversely proportional to the cost of equity capital.
2. In 300 words describe the process and role of venture capital. Include responses to the following questions:
Why do venture capital investors exist?
Where does the funding come from?
Who makes the decisions about companies to invest in?
What types of companies do venture capitalists look to invest in?