Table of Contents

Chapter 1 - Business Valuation. 1

The Difference between Value and Price. 2

Major Valuation Approaches. 2

The Going Concern Concept 3

Liquidation Value. 3

Book Value. 4

Real Estate Value. 5

Asset Accumulation Method. 6

Enterprise Value. 7

Multiples Analysis. 7

Discounted Cash Flows. 11

Post Five-Year Cash Flows. 11

Negotiation of DCF Contents. 12

Adjustments to DCF. 12

Scenario Analysis. 12

The Discount Rate. 13

When DCF Fails. 18

Capitalization Model 18

Replication Value. 19

Comparison Analysis. 20

The Comparison of Sales Multiples. 21

The Comparison of Cash Flows. 21

The Comparison of Contract Revenues. 21

52-Week High. 22

Influencer Price Point 22

The Initial Public Offering Valuation. 23

The Strategic Purchase. 23

Extraneous Valuation Factors. 23

The Control Premium.. 24

The Lack of Control Discount 25

The Lack of Marketability Discount 25

The Key Person Discount 26

The Portfolio Discount 26

The Choice of Valuation Methods to Use. 26

The Valuation Floor and Ceiling. 27

Chapter 2 - Additional Valuation Topics. 31

Valuation of Intangibles. 31

Incremental Cash Flow Analysis. 32

Intangible Asset Useful Lives. 32

Aggregate Valuation. 32

Excess Earnings Method. 32

Comparable Pricing Method. 33

Replication Value. 33

Relief-from-Royalty Method. 33

Asset-Based Valuations. 33

Excess or Deficient Assets. 33

Adjustments for Business Risk. 34

Adjusting Factors. 35

Multiples Using Sellers Discretionary Earnings. 36

The Earnout 37

Valuation Mistakes. 38

Rules of Thumb. 39

Answers to Course Questions. 42

Glossary. 47

Index. 49

 

Final Examination.......................................................................................................................................................51