Reference no: EM132940372

Pleas provide detailed explanation on each of the following questions.

Link: https://www.bloombadberg.com/profile/extracompany/2292Z:LN

1. Is the following affirmation of an accountancy expert true? "The valuation criterion which reflects the value of the shares of a company in the most accurate manner is based on the amount of the shareholder's equity of its balance sheet. Stating that the value of a company's shares equals its book value is a valid argument."

2. Could we say that goodwill is equivalent to brand value?

3. Could we say that the value of shares is intangible?

4. When calculating the WACC, is the weighting of the debt and the shares done with book values of debt and shareholder's equity or with market values?

5. The market risk premium is the difference between the historical return on the stock market and the risk-free rate, for every year. Why is it negative for some years?

6. Could we assume that, as we cannot predict the future evolution of the value of shares, a good approximation would be to consider it constant during the next five years?

7. The reasonable thing to do is to finance current assets (collections, inventories...) with short-term debt, and fixed assets with long-term debt. Is this correct?

8. Is the market risk premium a parameter for the national economy or for the world economy?

9. The market risk premium is the difference between the historical return on the stock market and the return on bonds. But how many years does "historical" imply? Shall we use the arithmetic mean or the geometric one?

10. We are valuing a company, a lot smaller than ours, in order to buy it. As that company is a lot smaller than ours it will have no influence on the capital structure and on the risk of the resulting company. This is the reason why I believe that the beta and the capital structure which are relevant to the valuation of the company we are analyzing are the ones of our company. Am I right?