If pre-money the venture generates 1 million of earnings


Your text provides a simple methodology of valuing a venture before and after venture capital funding.

If Pre-Money, the venture generates $1 million of earnings capitalized at 20%, the Pre-Money venture is worth $5 million.

Then if $5 million is invested, the Post-Money venture is worth $10 million. What is being assumed? Is that necessarily so?

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Financial Management: If pre-money the venture generates 1 million of earnings
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