Week 7 Solutions

# Week 7 Solutions - Week 7 Solutions Exercise 17-7 Question...

This preview shows pages 1–3. Sign up to view the full content.

Week 7 Solutions Exercise 17-7 Question : Group these valuation approaches into asset-based, income approach, and market approach types: a) adjusted book value method b) capitalization of earnings method c) discounted future earnings method d) guideline public company method e) merger and acquisition method f) rules of thumb approach Solution: a. Asset approach. b. Income approach. c. Income approach. d. Market approach. e. Market approach. f. Market approach. Exercise 17-14 Question : Solution: a. and b. Year Book Value Abn. Earn. P/V Factor P/V 1 \$220,000 \$23,000 .9091 \$20,909 2 254,000 14,600 .8265 12,067 3 281,300 6,870 .7513 5,161 Totals \$44,470 \$38,137 c. Business valuation = \$220,000 + \$38,137 = \$258,137 Exercise 17-15 Question : Earnings valuation models. Bayview Real Estate Development… Solution: a. Business valuation with equal weighting of earnings: Average earnings = (\$2,300,000 + \$2,600,000 + \$2,000,000 + \$1,400,000 + \$1,800,000) / 5 years = \$2,020,000 Business value = \$2,020,000 / .15 = \$13,466,667

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
b. Business valuation with current earnings weighted more heavily: Year Earnings Weight Factor Weighted Earnings 1 \$2,300,000 1 \$2,300,000 2 2,600,000 2 5,200,000 3 2,000,000 3 6,000,000 4 1,400,000 4 5,600,000 5 1,800,000 5 9,000,000 Totals 15 \$28,100,000 Weighted average earnings = \$28,100,000 / 15 = \$1,873,333
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 3

Week 7 Solutions - Week 7 Solutions Exercise 17-7 Question...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online