CFAI 2013 mock equity part.
Analyst prefers the guideline transactions method (GTM) to value the company.
-Some recent purchase transactions of similar farms indicate an average market value of invested capital to EBITDA multiple of 5.
-The company commands a 50% control premium.
Do we need to adjust the EBITDA ratio because of control premium?
The CFAI solution say yes, but Schweser Book3 page.284
When using the GTM, prior acquisition values for entire companies that already reflect any control premiums are used, so no additional adjustment for a controlling interest is necessary.
Analyst prefers the guideline transactions method (GTM) to value the company.
-Some recent purchase transactions of similar farms indicate an average market value of invested capital to EBITDA multiple of 5.
-The company commands a 50% control premium.
Do we need to adjust the EBITDA ratio because of control premium?
The CFAI solution say yes, but Schweser Book3 page.284
When using the GTM, prior acquisition values for entire companies that already reflect any control premiums are used, so no additional adjustment for a controlling interest is necessary.