Anavex Life Sciences Corp (AVXL)

[Bourbon_on_my_cornflakes]

Wrong answer. Should be $88.17.

your mistakes:
1. a discount rate of 5% is way to low. an appropriate rate would be 20% for a venture capital type investment.
2. your calculation has no residual value - the company does not disappear after year 5. To calculate the residual, divide year 5 earnings by the discount rate minus the long-term growth rate of say 5%, then present value it using the year 5 discount factor.

At 20%
Year 1: $1 / (1 + 0.2)^1 = $0.83
Year 2: $2 / (1 + 0.2)^2 = $1.39
Year 3: $5 / (1 + 0.2)^3 = $2.89
Year 4: $12.50 / (1 + 0.2)^4 = $6.03
Year 5: $25 / (1 + 0.2)^5 = $10.05
Residual: $25/(.2-.05) = $166.67, $166.67 / (1 + (0.2)^5 = $66.98

Sum = $88.17