After reading the case, you will choose one side to assist (you’ve been hired by Dave James OR you’ve been hired by the three Branson brothers). Prepare a Business Valuation Report. Explain the reasoning for applying any premiums or discounts that other business valuators might use. Discuss limitations, if any, in your report. Given that Branson Trucking possesses a large amount of tangible assets, an asset-based approach can provide a baseline valuation. This method is able to compute the company's net asset value by adding the fair market value of its assets and subtracting liabilities. Keeping this information in mind, the highlighted information provided in the scenario is as follows: Total Assets (Fair Market Value): $10,500,000 Total Liabilities: $5,100,000 Net Asset Value: $5,400,000 Net Income (2020): $1,172,000 Retained Earnings: $2,065,000 Application of Premiums and Discounts Control Premium: A control premium is applied to reflect the value of having a controlling interest in the company. This premium can be justified if Dave James plans on implement a variety changes that could then enhance the company's value after the change of ownership. Minority Discount: On the other hand, if the change in ownership involves purchasing a minority stake, a discount may be required in order to account for the lack of control over the company's decisions and decision making process Marketability Discount: A discount due to the lack of marketability could be applied due to the fact that Branson Trucking is a privately held company, and its shares have not yet reached the level in which they are publicly traded.
After reading the case, you will choose one side to assist (you’ve been hired by Dave James OR you’ve been hired by the three Branson brothers).
- Prepare a Business Valuation Report.
- Explain the reasoning for applying any premiums or discounts that other business valuators might use.
- Discuss limitations, if any, in your report.
Given that Branson Trucking possesses a large amount of tangible assets, an asset-based approach can provide a baseline valuation. This method is able to compute the company's net asset value by adding the fair market value of its assets and subtracting liabilities.
Keeping this information in mind, the highlighted information provided in the scenario is as follows:
Total Assets (Fair Market Value): $10,500,000
Total Liabilities: $5,100,000
Net Asset Value: $5,400,000
Net Income (2020): $1,172,000
Application of Premiums and Discounts
Control Premium: A control premium is applied to reflect the value of having a controlling interest in the company. This premium can be justified if Dave James plans on implement a variety changes that could then enhance the company's value after the change of ownership.
Minority Discount: On the other hand, if the change in ownership involves purchasing a minority stake, a discount may be required in order to account for the lack of control over the company's decisions and decision making process
Marketability Discount: A discount due to the lack of marketability could be applied due to the fact that Branson Trucking is a privately held company, and its shares have not yet reached the level in which they are publicly traded.
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