Valuation of business, Finance Basics

Assignment Help:

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


Related Discussions:- Valuation of business

Public expenditure, what is the importance of public expenditure

what is the importance of public expenditure

How can you analysis organization position, The organization performed very...

The organization performed very well during the last year and generated profit in each segment. In the food and beverage segment, the company has made 30% net profit and in rooms a

Discounted cash flow rate of return of a project, Given the following Prese...

Given the following Present Value Plot for Projects A and B, which are mutually exclusive projects, answer the following questions: (i) What is the DCFROR for Project A? fo

Information signaling effect theory, Information Signaling Effect Theory ...

Information Signaling Effect Theory Advanced via Stephen Ross in year 1977, He argued such in an inefficient market; management can utilize dividend policy to signal significa

Constraints of venture capital in us, Constraints of Venture Capital in US ...

Constraints of Venture Capital in US 1. Require of rich investors in US, thus inadequate equity capital. 2. Inefficiencies of stock market - NSE is investors and inefficien

Systems and subsystems, SCENARIO You have just moved out of home and have ...

SCENARIO You have just moved out of home and have a part-time job that pays you $18 per hour after tax (you work 20 hours a week). You also have $5000 in a savings account. You

Partnerships - types of business organisations, Partnerships - Types of B...

Partnerships - Types of Business Organisations Defination "The relationship, that exists with persons carrying on a business in common by a view of profit." Formati

Determine eps and dfl, The operating profit (EBIT) of ABC Ltd is Rs. 1,60,0...

The operating profit (EBIT) of ABC Ltd is Rs. 1,60,000. Its capital structure consists of the following: 10% Debentures Rs. 500000 12% Preference Shares 1

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd