Valuing the Investment

Thus far, we have forecasted the first five years of cash flows from Kleiner Perkins’ investment in Ideko, and we have estimated the investment’s unlevered cost of capital. Here, we combine these inputs to estimate the value of the opportunity.

The first step is to develop an estimate of Ideko’s value at the end of our five-year forecast horizon. To do so, we consider both a multiples approach and a discounted cash flow (DCF) valuation using the WACC method.

Given Ideko’s free cash flow and horizon value, we then estimate its total enterprise value in 20X5 using the APV method. Deducting the value of debt and Kleiner Perkins’ initial investment from our estimate of Ideko’s enterprise value gives the NPV of the investment opportunity.

In addition to NPV, we look at some other common metrics, including IRR and cash multiples.