Estimate the Value of a Privately Held Firm Based on the Following

question 14

Multiple Choice

Estimate the value of a privately held firm based on the following information: total market value (or capitalization value) of a comparable firm = $200,000; net income of the comparable firm = $40,000; number of shares outstanding for the comparable firm = 20,000; net income for the target firm = $15,000; and number of shares outstanding for the target firm = 10,000.

• A)$7.50
• B)$10.00
• C)$12.50
• D)$15.00

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Definitions:

Current Position Analysis

A financial evaluation that assesses a company's current financial health, focusing on its ability to meet short-term obligations with its current assets.

Short-Term Creditors

Individuals or entities that have lent money to a company with the expectation that it will be repaid within a short timeframe, typically less than one year.

Working Capital

The difference between a company's current assets and current liabilities, indicating short-term financial health and operational efficiency.

Current Assets

Resources anticipated to be turned into cash, sold off, or used up within a year or over the course of the operational cycle, depending on which period extends further.