Reading 33: Equity Valuation: Applications and Processes-LOS 2010, face, important, choosing, criteria

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Session 10: Equity Valuation: Valuation Concepts
Reading 33: Equity Valuation: Applications and Processes

LOS f: Illustrate the broad criteria for choosing an appropriate approach for valuing a given company.

 

 

 

An ownership perspective can be important for an analyst determining the value of a share position. A block of shares that is large enough to direct the future actions of the firm should receive a:

A) a discount for size.

B) premium for control.

C) premium for block-size.

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A share position that is large enough to direct the future actions of a firm should receive a premium for control.

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An ownership perspective can be important for an analyst determining the value of a share position. A discount for lack of marketability would most likely be assigned to a position of shares in which of the following?

A) A non-publicly traded firm.

B) A very large publicly traded firm.

C) A bankrupt firm.

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A share position in a non-publicly traded firm would be assigned a discount because it may require a lengthy search to locate willing and able buyers, and they may be only willing to purchase it at a discount.

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An ownership perspective can be important for an analyst determining the value of a share position. A block of shares that is very large in relation to the daily trading volume should receive a:

A) premium for block-size.

B) discount for lack of liquidity.

C) a brokerage discount for volume.

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A share position that is very large in relation to the daily trading volume of the shares should be subject to a discount for lack of liquidity as it may take additional time to liquidate the position.

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