Question

In: Finance

19. Which two private company transactional databases cover relatively small companies? a. IBA Market Database and...

19. Which two private company transactional databases cover relatively small companies?

a. IBA Market Database and Done Deals

b. BIZCOMPS and IBA Market Database

c. IBA Market Database and Mergerstat

d. Mergerstat and BIZCOMPS

20. Which component of the Ibbotson Build-Up Method relates to the “unsystematic risk” associated with a particular business entity? Please explain your answer.

a. Risk free rate

b. Equity risk premium

c. Beta

d. Specific company risk premium

Expert Solution

19 Answer:

Option B is Correct:

BIZCOMPS and Institute of Business Appraisers —The BIZCOMPS and Institute of Business Appraisers databases cover transactions of relatively small companies.

Option A is incorrect:

The Institute of Business Appraisers database covers transactions of relatively small companies, however, the DoneDeals database includes deal prices ranging from $1 million to $1 billion.

Option C is incorrect:

The Institute of Business Appraisers database covers transactions of relatively small companies, however,Mergerstat data generally include transactions where one of the companies was publicly traded.

Option D is incorrect:

Mergerstat data generally include transactions where one of the companies was publicly traded, however, BIZCOMPS database covers transactions of relatively small companies

20 Answer:

Option D is Correct

Specific company risk premium: The specific company risk premium relates to the unsystematic risk of a particular business entity.

Option A is incorrect:

Risk free rate: Risk free rate relates to maturity risk. Maturity risk is the risk that the value may fluctuate due to changes in interest rates.

Option B is incorrect:

Equity risk premium: The equity risk premium relates to systematic risk. Systematic risk is uncertainty of future returns based on movements of the market.

Option C is incorrect:

Beta: Beta is not a component of the Ibbotson Build-Up Method

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