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Dear John,
Hope you are fine,Could you explain the below statement and why they are wrong: ( June 2016 – MCQ 23)
1- An asset-based valuation would be useful for an asset-stripping acquisition
2- Replacement cost basis provides a deprival value for Bluebell CoMany thanks
Asset strippers buy a business because they expect to be able to sell the assets for more than they pay for the company. If they were paying the value of the assets then that would not be possible.
The deprival value is what the company would lose if an assets wasn’t there – not the cost of replacing it.
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