When Using the Multiples Analysis Approach to Valuing a Business

question 17

Multiple Choice

When using the multiples analysis approach to valuing a business, one must be aware

• A) of the presence of a marketability discount that can be sizable.
• B) that identifying one or more comparable companies is not an easy task.
• C) of differences in the capital structures of the companies being compared.
• D) All of the above.

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Definitions:

Level of Significance

The probability of making a Type I error in hypothesis testing, serving as a critical value for deciding whether to reject the null hypothesis.

P-value

The p-value is a measure of the probability of observing results at least as extreme as those measured when the null hypothesis of a study is true.

Correct Decision

A decision made in statistical hypothesis testing that accurately reflects the true state of the world.

Type I Error

The mistake of rejecting a true null hypothesis or falsely claiming to detect an effect that does not actually exist.