Question #6

Reading: Reading 24 Private Company Valuation

PDF File: Reading 24 Private Company Valuation.pdf

Page: 4

Status: Incorrect

Correct Answer: A

Your Answer: C

Part of Context Group: Q5-6
Shared Context
- The "Choo Comparison Method" of valuing a private company is consistent with which major approach? A) Income Approach. B) Multiple Approach. C) Market Approach.
Question
Using Choo's additional notes on Bakan's 2x10 Net Income, which of the following is the most accurate estimate of normalized earnings for 2x10?
Answer Choices:
A. Loss $150,000
B. Profit $250,000
C. Loss $180,000
Explanation
Net Income $100,000 – $200,000 – $50,000 = –$150,000 Deduct $200,000 for extra CEO compensation Deduct $50,000 for extra lease cost One off online set up cost is sunk and not relevant to future earnings.
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