Determine the Market Value of a "Comparable" Firm Based on the Following

question 3

Multiple Choice

Determine the market value of a "comparable" firm based on the following information: value of target firm = $4,000,000; net income of target firm = $200,000; and net income of "comparable" firm = $500,000.

• A) $4 million
• B) $7.5 million
• C) $10 million
• D) $12.5 million
• E) $15 million

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Definitions:

Owner Withdrawal

The process by which an owner takes funds or assets out of the business for personal use, often referred to as "draws."

Income Statement

A financial document showing a company's income, expenses, and net profit over a specific period of time.

Fees Earned

Revenues generated from providing services to clients or customers.

Income Statement

The income statement is a financial report that gives a summary of a company's revenue, expenses, and profits over a specific period, showing how revenue is transformed into net income.