- CFA Exams
- 2022 Level II
- Study Session 11. Equity Valuation (3)
- Reading 31. Private Company Valuation
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Learning Outcome Statements PDF Download
| 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. |
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