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Post 4 - Why does the conventional DCF not work for valuing a start-up/young firm?

Wizenius

The discounting factor would be typically more compared to the one used in publicly traded firms. This discounting factor is targeted rate of return of the VC investor and is set high enough to capture the foreseen/perceived risk of operating the business and chances of its survival.

DCF 52
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Methods and Examples on How to Value a Company

Lake Country Advisors

It’s integral to ensuring that the sale benefits all stakeholders and should be one of your priorities before advertising it to potential buyers. It’s a delicate balancing act, as inaccurate valuations have polarizing consequences. First, identify a group of similar publicly traded technology companies.

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Understanding Valuation Techniques in Mergers and Acquisitions

Sun Acquisitions

This approach relies on analyzing the market value of comparable publicly traded companies, known as guideline companies or multiples. By comparing key financial metrics such as price-to-earnings (P/E) ratios, price-to-sales (P/S) ratios, and price-to-book (P/B) ratios, analysts can estimate the target company’s value.

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Mergers and Acquisitions Valuation Strategies: Unlocking the Secrets to Successful M&A Transactions

Sun Acquisitions

It’s the process of determining the financial worth of a business, helping acquirers and sellers establish a fair price and make informed decisions. It uncovers any hidden risks or opportunities, allowing parties to assess the target company’s financial health. The net asset value represents the company’s worth.