Chartered Financial Analyst Level 2

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Explanation:

Calculation Explanation

Step 1: Calculate Enterprise Value (EV) before discounts

EBITDA = $35,000,000
EV/EBITDA multiple = 8.0
EV = EBITDA × Multiple = $35,000,000 × 8.0 = $280,000,000

Step 2: Apply discounts

Discount for lack of control (DLOC) = 12%
Discount for lack of marketability (DLOM) = 15%

Step 3: Calculate total discount factor Total discount factor = 1 - [(1 - DLOC) × (1 - DLOM)] Total discount factor = 1 - [(1 - 0.12) × (1 - 0.15)] Total discount factor = 1 - [0.88 × 0.85] Total discount factor = 1 - 0.748 = 0.252 or 25.2%

Step 4: Calculate final value Final value = EV × (1 - Total discount) Final value = $280,000,000 × (1 - 0.252) Final value = $280,000,000 × 0.748 = $209,440,000

Therefore, the correct answer is A: $209,440,000.

Explanation:

Calculation Explanation

Step 1: Calculate Enterprise Value (EV) before discounts

EBITDA = $35,000,000
EV/EBITDA multiple = 8.0
EV = EBITDA × Multiple = $35,000,000 × 8.0 = $280,000,000

Step 2: Apply discounts

Discount for lack of control (DLOC) = 12%
Discount for lack of marketability (DLOM) = 15%

Step 4: Calculate final value Final value = EV × (1 - Total discount) Final value = $280,000,000 × (1 - 0.252) Final value = $280,000,000 × 0.748 = $209,440,000

Therefore, the correct answer is A: $209,440,000.

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An analyst is assessing the value of a private company from the perspective of a non-controlling, minority-interest shareholder. The analyst gathers the following information:

The company's normalized EBITDA is `$35`,000,000

The comparable peer multiple for EV/EBITDA is 8.0

The discount for lack of control is 12%

The discount for lack of marketability is 15%

Based on the guideline public company method, the value of the company is:

Exam-Like

$209,440,000.

$246,400,000.

$280,000,000.