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

question 38

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 a 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) $5.00
• B) $7.50
• C) $10.00
• D) $12.50
• E) $15.00

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Definitions:

Amortized

This refers to the process of gradually paying off a debt through regular payments over a set period, factoring in both principal and interest.

Legal Life

The duration for which an asset is protected or regulated by legal rights, often referring to intellectual property or contractual agreements.

Patent

An exclusive right granted for an invention, which provides the patent holder with protection for the invention from commercial exploitation by others.

Intangible Asset

An asset that lacks physical substance, such as patents, trademarks, goodwill, and copyrights, which can nonetheless provide economic benefits.