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发表于 2011-3-21 13:48 | 只看该作者

Reading 46: Private Company Valuation-LOS a 习题精选

contrast, companies, valuation, 2011, class
Session 12: Equity Investments: Valuation Models
Reading 46: Private Company Valuation

LOS a: Compare and contrast public and private company valuation.

 

 

An analyst is examining three companies. Given the information below, which of them is most likely to be a private firm?

Firm Number of Years in Operation Market Capitalization Required Return for Common Stock
A 12 years $1,324.8 million 14.8%
B 4 years $1,313.9 million 18.3%
C 19 years $2,231.0 million 16.4%

A)
 Firm B.
B)
 Firm A.
C)
 Firm C.

 

The firm most likely to be a private firm is Firm B. Compared to public firms, private firms are less mature (4 years for Firm B), smaller (market cap of B is $1,313.9 million), and have higher required returns (required return for B is 18.3%).

 

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发表于 2011-3-21 13:48 | 只看该作者

An analyst is examining the stock of three companies. Given the information below, which of them is most likely to be the stock of a private firm?

Firm Restrictions on Sale of Stock? DLOM Stock Ownership of 5 Largest Owners
A Yes 0% 28%
B No 5% 35%
C Yes 15% 64%

A)
 Firm B.
B)
 Firm A.
C)
 Firm C.

The stock most likely to be that of a private firm is Firm C. Compared to public stock, private firm stock often has agreements that prevent shareholders from selling, is less liquid (discounts for lack of marketability (DLOM) of C is 15%), and control is usually concentrated in the hands of a few shareholders (stock ownership of largest owners of Firm C is 64%).

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发表于 2011-3-21 13:48 | 只看该作者

Which of the following statements most accurately describes the difference between private and public firm managers?

A)
 Because managers in a public firm are often paid with incentive compensation, public managers may take a longer term view than private managers.
B)
 Although managers in a public firm are often paid with incentive compensation, public managers may take a shorter term view than private managers because shareholders often focus on the short-term.
C)
 Because managers in a private firm are concerned with having the firm go public, private managers may take a shorter term view than public managers.

Although managers in a public firm are often paid with incentive compensation such as options, shareholders often focus on short-term measures such as quarterly earnings and the consistency of such. Management may therefore take a shorter term view than they otherwise would. Private firms should be able to take a longer term view.

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