Question #3 - Reading 24 Private Company Valuation

Reading: Reading 24 Private Company Valuation

PDF File: Reading 24 Private Company Valuation.pdf

Page: 3

Status: Correct

Correct Answer: B

Shared Context

- When valuing private companies, how would the factors described by Choo usually be classified? A) Factor 1 Stock-specific, Factor 2 Stock-specific. B) Factor 1 Stock-specific, Factor 2 Company-specific. C) Factor 1 Company-specific, Factor 2 Company-specific.

Question

Is Choo correct in his assessment of Factor 3?

Answer Choices:

A. Yes

B. No, it is rare for private companies to allow key management to own equity

C. No, board equity ownership usually results in a longer-term view than public companies

Explanation

Shareholders in public firms often focus on short-term measures of performance due to pressure from institutional investors, whereas the equity ownership leads to a longer-term view for owner managers.

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