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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Business Valuation
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.
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! 🙂