Important Issues That One Must Consider in Valuing Private Firms

question 47

Multiple Choice

Important issues that one must consider in valuing private firms include

• A) whether key people remain in the firm, the amount of dividends that one may receive in the coming years, and whether a controlling ownership interest or a minority interest is being valued.
• B) the difficulty in valuing young, rapidly growing companies in contrast to mature, stable companies, the amount of dividends that one may receive in the coming years, and whether a controlling ownership interest or a minority interest is being valued.
• C) the difficulty in valuing young, rapidly growing companies in contrast to mature, stable companies, whether key people remain in the firm, and whether a controlling ownership interest or a minority interest is being valued.
• D) None of the above.

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Definitions:

Service Cost

The actuarial present value of benefits earned by employees in the current period under a defined benefit plan, included in pension expense.

Interest Cost

The cost incurred by an entity for borrowing funds, typically reflected as an expense in the income statement.

Pension Expense

The annual cost recognized by an employer for maintaining a retirement plan for its employees.

Actuarial Assumptions

Estimates used to calculate the present and future financial obligations of pension plans and insurance policies, often involving life expectancy and interest rates.