Estimate the value of office

Assignment Help Accounting Basics

Reference no: EM13963241

You have been asked to value Office Help, a private firm providing office support services in the New York area.

The firm reported pretax operating income of $10 million in its most recent financial year on revenues of $100 million. In the most recent financial year, you note that the owners of the business did not pay themselves a salary. You believe that a fair salary for their services would be $1.5 million a year.
The cost of capital for comparable firms that are publicly traded is 9 percent. (You can assume that this firm will have similar leverage and cost of capital.)
The firm is in stable growth and expects to grow 5 percent a year in perpetuity. The tax rate is 40 percent.

The average illiquidity discount applied to private firms is 30 percent, but you have run a regression and arrived at the following estimate for the discount:

Illiquidity Discount = 0.30 - 0.04 (ln [Revenues in millions]) Estimate the value of Office Help for sale in a private transaction (to an individual).

Reference no: EM13963241

Questions Cloud

Book value ratio for comparable firms : a. Estimate the average price/book value ratio for these comparable firms. Would you use this average P/BV ratio to price the IPO? b. What subjective adjustments would you make to the price/book value ratio for this firm and why?

Descripe what is web cache about secure computer network : Descripe what is each topic about secure computer network and why its important? Describe these topics to somone that has no knowledge in computer networks to deliver the idea to him?

Estimate the price-book value ratio for nch : a. Based on these inputs, estimate the price/book value ratio for NCH. b. How much would the return on equity have to increase to justify the price/book value ratio at which NCH sells for currently?

What is the command that you would use to compile the code : Describe the behavior when you compile the program, with no options. What is the command that you would use to compile the code and create the executable "power2"?

Estimate the value of office : Illiquidity Discount = 0.30 - 0.04 (ln [Revenues in millions]) Estimate the value of Office Help for sale in a private transaction (to an individual).

Who is the intended audience for this product? : Answer the following questions in your paper: Who is the intended audience for this product? What needs does the product or service propose to fulfill? What are the positive aspects of the advertising campaign

Estimate the correct value for the firm : You also know that the market value of equity is three times the book value of equity, and the market value of debt is equal to the book value of debt. Estimate the correct value for the firm.

Identify a system process or service in your organization : Assess three (3) critical sources of data-gathering initiatives for an HRIS needs analysis and highlight the advantages and disadvantages of using each of those sources. Identify a system, process, or service in your organization's HRIS that could ..

Total value and the value of its equity : Estimate the value of the noncash assets of the firm, its total value, and the value of its equity.

User Account

All Pages