Reading 22
Private Company Valuation
3 modules 35 min
0/3
Exam Focus
For the exam, be familiar with differences between private and public companies and know the different definitions and approaches for value estimation. Be prepared to normalize earnings, determine an appropriate discount rate, and calculate private firm value. Know when and how discounts for control and marketability are applied.
Modules
- Module 22.1Private Company BasicsContrast important public and private company features for valuation purposes. · Describe uses of private business valuation and explain key areas of focus for financial analysts. · Explain cash flow estimation issues related to private companies and adjustments required to estimate normalized earnings.11 min · 3 LOS
- Module 22.2Discount RateExplain factors that require adjustment when estimating the discount rate for private companies. · Compare models used to estimate the required rate of return to private company equity (for example, the CAPM, the expanded CAPM, and the build up approach). · Explain and evaluate the effects on private company valuations of discounts and premiums based on control and marketability.11 min · 3 LOS
- Module 22.3ValuationExplain the income, market, and asset based approaches to private company valuation and factors relevant to the selection of each approach. · Calculate the value of a private company using income based methods. · Calculate the value of a private company using market based methods and describe the advantages and disadvantages of each method.13 min · 3 LOS