Limitations in Applying the Comparable Companies' Method of Valuation Include

question 108

Multiple Choice

Limitations in applying the comparable companies' method of valuation include which of the following?

• A) Finding truly comparable companies is difficult
• B) The use of market-based methods can result in significant under- or overvaluation during periods of declining or rising stock markets
• C) Market-based methods can be manipulated easily, because the methods do not require a clear statement of assumptions with respect to risk, growth, or the timing or magnitude of future earnings and cash flows.
• D) A, B, & C
• E) A & B only

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Definitions:

Prior Probabilities

The probabilities of different outcomes or hypotheses before new evidence is considered.

Videography Business

A professional service focused on the production of video content for various events, advertisements, or creative projects.

Expected Monetary Value

The predicted average outcome of a decision if it were to be repeated multiple times.

Payoff Table

A table showing the possible outcomes or gains for different decisions or strategies under various conditions.