Question #41
Reading: Reading 24 Private Company Valuation
PDF File: Reading 24 Private Company Valuation.pdf
Page: 21
Status: Incorrect
Correct Answer: A
Your Answer: B
Part of Context Group: Q40-41
Shared Context
Question
Using Comment 4, which of the following method is least likely to require a discount for lack of control?
Answer Choices:
A. Guideline Transaction Method
B. Capitalized Cash Flow Method
C. Guideline Public Company Method
Explanation
Guideline Public Company Method uses the price multiples of comparable public
companies as Park Limited. This method typically assumes minority control. Guideline
Transaction Method uses the price multiples of acquisitions of the entire public or private
companies, thus reflecting controlling interest. Depending on the cash flows and discount
rate estimated, the capitalized cash flow method can be applied towards the valuation of
minority or control interest.