1) I need a good desrcption/understadning of different methods of evulating private companies. (i need to...

1) I need a good desrcption/understadning of different methods of evulating private companies. (i need to turn this into a 500 word essay so the more detial the better thank you!)

1b) Out of the numerous mathods that exsist, i need to illustarte three through excel (please explain in detial how this would work or how it should be laid out if possible thank you!)

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Expert Solution

Hi,

Valuing private companies has always been the most difficult task because of non availability of the information about the subject company.Since, this non availability of information is the key factor we tend to look at various other methods for valuing a private company.

The best approach towards valuing a private company would be the method of comparables. In this process you will have to find a public company that is comparable and then use the variables of the company and adjust them as and when needed to fit the numbers for the private company.

After the adjustment you can use the numbers for the valuation of the company.

Now for eg. you find out that the Public company has a D/E Ratio of 3X. This would imply that the private company should ideally also have a D/E of 3X. But this may not be true. Since this is the private company the lenders would ask for a higher equity in the company. Or, they may charge higher interest which would adversly affect the bottom line of the company. Hence the Debt or the Equity portion might have to be adjusted in order to attain a number that reflects the actual position of the company.

jeff jeffy answered 1 year ago

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