It is common practice in valuation to add a premium for control this value or subtract...
It is common practice in valuation to add a premium for control this value or subtract out a discount (minority, marketability, private company etc.). Is this a reasonable practice? Why or why not?
Homework Answers
I think this is not a reasonable practice as for doing the valuation, there is no need to apply discounts and premiums for most items to the estimated value.
To value control, there is a need to re-value the firm with optimal management and the difference between this value and the status quo value should be the value of control.
Control premiums are popular during takeover bids, where large companies acquire a large number of shares in order to gain ownership control of the target.
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It is common practice in valuation to add a premium for control
this value or subtract...
A control premium of 30% yields a control value of $125 per share. The resulting discount...
A control premium of 30% yields a control value of $125 per share. The resulting discount for lack of control must be: $96.15 b. 23.08% c. 70.00% d. 30.00%
Calculate the percentage of premium paid given the following details: Details: Although rumors of the transaction...
Calculate the percentage of premium paid given the following details: Details: Although rumors of the transaction leaked out yesterday, AcquirerCo officially announced today that it has agreed to buy TargetCo for $25.00 a share. TargetCo shares closed higher yesterday at $20.00. 25% 20% 15% Not enough information Calculate the offer price per share given the following details: Transaction Details: AcquirerCo agreed to buy TargetCo with a mix of cash and AcquirerCo stock. TargetCo stockholders will receive $5.00 in cash and...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant-growth valuation model. Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate risk premium on Craft stock is about 8%. The a. Given that Craft...
Integrative: Risk and valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a...
Integrative: Risk and valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant-growth valuation model. Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publidy traded, Hamlin believes that an appropriate risk premium on Craft stock is about 9%. The risk-free rate is currently...
Practice with probability and statistics - Feel free to use a calculator (or spreadsheet) to add/divide/etc,...
Practice with probability and statistics - Feel free to use a calculator (or spreadsheet) to add/divide/etc, but please don't use any built-in statistical functions. 2, 2, 2, 3, 3, 4, 4, 5, 6, 6, 7, 7,8,s A. What is the probability that an object chosen at random from this box has length 2 cm? B. What is the average length of the (L) (also called the expectation value of length) of the objects? C. What is the probability that an...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundr...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant-growth valuation model. Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate risk premium on Craft stock is about 8%. The risk-free rate is currently...
On 1/1/20x1, Petwoud Company exchanged 25,000 shares of its $1 par value common stock and $150,000 cash to acquire 80% of the outstanding voting common stock of Supagud, Inc. At the acquisition date, the fair value of Petwoud Company’s common stock was $
On 1/1/20x1, Petwoud Company exchanged 25,000 shares of its $1 par value common stock and $150,000 cash to acquire 80% of the outstanding voting common stock of Supagud, Inc. At the acquisition date, the fair value of Petwoud Company’s common stock was $20 per share. Petwoud’s payment includes a control premium of $15,000.
Practice with probability and statistics - Feel free to use a calculator (or spreadsheet) to add/divide/etc,...
Practice with probability and statistics - Feel free to use a calculator (or spreadsheet) to add/divide/etc, but please don't use any built-in statistical functions. You measure the lengths of 14 objects in a box and get the following results (in cm): 2, 2, 2, 3, 3, 4, 4, 5, 6, 6, 7, 7, 8, 8 A. What is the probability that an object chosen at random from this box has length 2 cm? What is the average length of the(L)...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considenng acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant growth valuation model Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate risk premium on Craft Stock is about 7%. The risk-free rate is...
3. Fundamentals of the free cash flow corporate valuation model Aa Aa E Several methods can...
3. Fundamentals of the free cash flow corporate valuation model Aa Aa E Several methods can be used to compute the intrinsic value of a share of a company's common stock. One method uses the free cash flow (FCF) valuation model, while the another method uses the dividend discount model. The FCF valuation model computes a firm's value-also called its the value of its operating activities (Vop) and the value of firm's nonoperating value-as the sum of , where: the...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant-growth valuation model. Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate risk premium on Craft stock is about 8%. The a. Given that Craft...
Integrative: Risk and valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant-growth valuation model. Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publidy traded, Hamlin believes that an appropriate risk premium on Craft stock is about 9%. The risk-free rate is currently...
Practice with probability and statistics - Feel free to use a calculator (or spreadsheet) to add/divide/etc, but please don't use any built-in statistical functions. 2, 2, 2, 3, 3, 4, 4, 5, 6, 6, 7, 7,8,s A. What is the probability that an object chosen at random from this box has length 2 cm? B. What is the average length of the (L) (also called the expectation value of length) of the objects? C. What is the probability that an...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considering acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant-growth valuation model. Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate risk premium on Craft stock is about 8%. The risk-free rate is currently...
Practice with probability and statistics - Feel free to use a calculator (or spreadsheet) to add/divide/etc, but please don't use any built-in statistical functions. You measure the lengths of 14 objects in a box and get the following results (in cm): 2, 2, 2, 3, 3, 4, 4, 5, 6, 6, 7, 7, 8, 8 A. What is the probability that an object chosen at random from this box has length 2 cm? What is the average length of the(L)...
Integrative Risk and Valuation Hamlin Steel Company wishes to determine the value of Craft Foundry, a firm that it is considenng acquiring for cash. Hamlin wishes to determine the applicable discount rate to use as an input to the constant growth valuation model Craft's stock is not publicly traded. After studying the required returns of firms similar to Craft that are publicly traded, Hamlin believes that an appropriate risk premium on Craft Stock is about 7%. The risk-free rate is...
3. Fundamentals of the free cash flow corporate valuation model Aa Aa E Several methods can be used to compute the intrinsic value of a share of a company's common stock. One method uses the free cash flow (FCF) valuation model, while the another method uses the dividend discount model. The FCF valuation model computes a firm's value-also called its the value of its operating activities (Vop) and the value of firm's nonoperating value-as the sum of , where: the...
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