Valuation methodology of privately owned franchises

Reference no: EM133264452

Sports Inc. is also confused about the valuation methodology of privately owned franchises versus publicly traded franchises.

Assume, the subject franchise and recently comparable sold private franchises only finance with private funds, and both the subject and comparable franchises' CFFA grow at a constant rate.

You also know of three comparable sales:

Comp 1 sold for $100,000,000 with CFFA0 of $6,000,000 annually and a growth rate in CFFA assets of 3%.
Comp 2 sold for $110,000,000 with CFFA0 of $6,500,000 annually and a growth rate in CFFA assets of 3%.
Comp 3 sold for $100,000,000 with CFFA0 of $7,000,000 annually and a growth rate in CFFA assets of 3%.
You are to pick a CFFA0 for the subject firm between $5,000,000 and $7,500,000 and a growth rate (g) in the subject firm's CFFA0 between 5% and 7.25% and then value the subject firm taking care to explain the process/methodology to the client.

Reference no: EM133264452

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