Learning Outcome Statements

1. Private and public company valuation: similarities and contrasts

a. compare public and private company valuation;

2. Reasons for performing valuations

b. describe uses of private business valuation and explain applications of greatest concern to financial analysts;

3. Definitions (standards) of value

c. explain various definitions of value and demonstrate how different definitions can lead to different estimates of value;

4. Valuation approaches, earnings normalization and cash flow estimation issues

d. explain the income, market, and asset-based approaches to private company valuation and factors relevant to the selection of each approach;

e. explain cash flow estimation issues related to private companies and adjustments required to estimate normalized earnings;

5. Income approach methods of private company valuation

f. calculate the value of a private company using free cash flow, capitalized cash flow, and/or excess earnings methods;

g. explain factors that require adjustment when estimating the discount rate for private companies;

h. compare models used to estimate the required rate of return to private company equity (for example, the CAPM, the expanded CAPM, and the build-up approach);

6. Market approach methods of private company valuation

i. calculate the value of a private company based on market approach methods and describe advantages and disadvantages of each method;

7. Asset-based approach to private company valuation

j. describe the asset-based approach to private company valuation;

8. Valuation discounts and premiums

k. explain and evaluate the effects on private company valuations of discounts and premiums based on control and marketability;

9. The role of valuation standards in the valuation of private companies

l. describe the role of valuation standards in valuing private companies.