Valuation of business, Finance Basics

Valuation of Business

A business may be valued for different type of reasons that as for merger, acquisition, or takeover or liquidation or outright sale.  During purchasing a business, a buyer will be interested in not just the assets also for the future income this business is expected to create.

Theoretical value - within theory, if a purchaser buys a business, he is only buying a stream of future income flows and to arrive on the real purchase price the buyer will:

a) Consider the estimated probable cash flows.

b) Discount cash flows to their current value.

c) Add together the split amounts to provide the present value of income stream.  Whereas future income flows are constant:

    PV= C (1-(1+r)-n/r)                                  

Where like: PV     = Present value of income stream

                   c        = Inflow per annum

                   r       = Discounting rate

                   n      = Number of years the inflows will last

Posted Date: 1/31/2013 1:36:36 AM | Location : United States







Related Discussions:- Valuation of business, Assignment Help, Ask Question on Valuation of business, Get Answer, Expert's Help, Valuation of business Discussions

Write discussion on Valuation of business
Your posts are moderated
Related Questions
Define the term contractual savings depository institutions. Contractual savings institutions: Contractual savings institutions obtain funds at periodic intervals onto a

You buy a SML Bond for $980.  The bond has a face value of $1000 and an yearly  coupon rate of 8%.  There are five years left until maturity. a. What is the yield to maturity on

Question   Clifton-Peters Ltd is a manufacturer of household goods located in Melbourne. They presently make and wholesale fruit juicers, blenders and baking equipment. The Gen

Important Points for Capital Market Authority Apart from the above roles, CMA can assume the given steps to encourage progress of stock exchanges in US or other countries.

Yard Stick Required in Ratio Analysis 1. Past performance of the company The company's previous performance past ratio is needed to gauge or measure the company's present

what is cash budgeting and what is it used for

Advantage and Disadvantage of Sole Proprietorship Advantage of Sole Proprietorship High supervision of employees Income motivate owner Sole trade mostly ski


Marginal cost of finance This is cost of new finances or additional cost a company has to pay to raise and use additional finance is given by: (Total cost of marginal finan

Role of Venture Capital in Economic Development The categories of venture that capitalists might invest will include: a) Business start-ups - Whenever a business has been