Question

1. Which of the following are often true about the challenges of valuing private firms?

1. There is a lack of analyses generated by sources outside of the company.
2. Financial reporting systems are often inadequate.
3. Management depth and experience is often limited.
4. Reported earnings are often understated to minimize taxes.
5. All of the above.

In valuing private businesses, the U.S. tax courts have historically supported the use of which valuation method for purposes of estate valuation?

1. Discounted cash flow
2. Comparable company method
3. Tangible book value method
4. A combination of a and c
5. All of the above

1. All of the following are true of reverse mergers except for.

1. May be used to take a private firm public
2. May represent an effective alternative to an IPO
3. Commonly use private equity placements for financing
4. Requires 2 years of audited financial statements to take a private firm public
5. A and B

Answer 1

1. The correct answer is option e i.e. all of the above.

2. The correct answer is option b i.e. Comparable company method

3. The correct answer is option d i.e. Requires 2 years of audited financial statements to take a private firm public

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