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Dear Sir,
How do we find out which valuation method (Type 1, Type 2 or Type 3) has to be used to estimate the valuation of the firm?
In the exam, will the question specify which one has to be used?
It will depend on what information is given in the question with regard to the business and financial risk.
Thank you very much for the respond. Can you please give me an rough idea to of find out business and financial risk in the scenario.This is what I meant to ask you.
Thanking you sir.The question will make it very clear if the gearing is changing (it will specify how the money is being raised) and if the business risk is changing (it will tell you that the new project is in a different type of business than what the company is currently in, and it will give you information about the averages in the industry for that type of business).
If adjusted present value is required then usually (but not always) the requirements in the question will say that they want the APV.
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