Why is question 4 part 2 Absolute Valuation? I answered Relative Valuation. Is it because the firm is closely held and can’t easily be compared to other firms? Thanks!
Yep DC Zanini Wrote: ------------------------------------------------------- > Why is question 4 part 2 Absolute Valuation? I > answered Relative Valuation. Is it because the > firm is closely held and can’t easily be compared > to other firms? > > Thanks!
It’s a matter of perspective, since you’re minority interest in the question you add a minority discount for the reason stated below. Were you looking to buy 95% you’d now be in the controlling interest business and would have to add a control premium. trek7000 Wrote: ------------------------------------------------------- > Bannisja, I think it goes like this, you pay a > premium for the control, you wouldn’t pay less to > have control. > As with minority interests, it is discounted b/c > you have no control over what the company does. > you just go along for the ride.
DC Zanini Wrote: ------------------------------------------------------- > Why is question 4 part 2 Absolute Valuation? I > answered Relative Valuation. Is it because the > firm is closely held and can’t easily be compared > to other firms? > > Thanks! I put absolute because of: >He wants to value the company so as to be able to make a decision on the fair price to >pay for the investment. So he’s not concern about which company would be better to invest it, but rather the value of the company, and how much he’s willing to pay for it.
good call xck2000. thanks