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CA Final · Advanced Financial Management · Startup Finance

A startup, Kaveri Foods, is valued using the Berkus method. The assessor assigns up to ₹50 lakh for each of five factors: sound idea, prototype, quality management team, strategic relationships, and product rollout or sales. Scores awarded: sound idea ₹40 lakh, prototype ₹30 lakh, management team ₹45 lakh, strategic relationships ₹20 lakh, product rollout ₹10 lakh. What is the pre-revenue valuation?

The Berkus method adds the values assigned to each risk-reduction factor. Summing ₹40, ₹30, ₹45, ₹20 and ₹10 lakh gives ₹145 lakh, which is ₹1.45 crore. The maximum possible of ₹2.50 crore is not the assessed value.

  1. A₹1.45 croreCorrect
  2. B₹1.25 crore
  3. C₹2.50 crore
  4. D₹1.00 crore

Explanation

Sum of the assigned values = 40 + 30 + 45 + 20 + 10 = ₹145 lakh = ₹1.45 crore. The ₹2.50 crore is the maximum possible, not the assessed value.

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