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Business Valuation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Business Valuation

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
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    Posts
  • September 5, 2016 at 9:20 pm #338113
    dansindo
    Member
    • Topics: 24
    • Replies: 38
    • ☆☆

    Company A is an unquoted, property development company with a portfolio of over two hundred houses at various stages of renovation. It has been loss making for the last two years due to the economic downturn. David believes that new government legislation will bring a welcome boost to the housing market.

    What of the following valuation methods is most suitable for valuing company A?
    a. P/e ratio earnings
    b. DVM
    c. Market capitalization
    d. NRV

    ans. NRV

    Sir please explain to me why NRV is the appropriate answer. Thanks.

    September 6, 2016 at 5:29 am #338154
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54764
    • ☆☆☆☆☆

    Because it has been making losses for the last two years.

    As a result it wouldn’t really be worth anything at all if we were using the other three methods! 🙂

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