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Hi,
Bento Co – corporate reconstruction
The net asset valuation is based on assets and current liabilities in year 1. Why was the long-term debt of 50m not deducted?
However, the DVM valuation method captures cashflows for years 1-4 and dividend growth in perpetuity.
Surely there’s no comparison between both valuation methods?
Thanks
Please tell me which years exam the question is in. I have all the past questions but I cannot remember the name of every question in every exam 🙂
1. The value of the company is equity + debt (if we wanted the value of the equity then we would subtract the long-term debt).
2. We would expect the two values to be different. There is no ‘perfect’ way of valuing a business and all we can do in practice is obtain a range of values.
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