Which of the following is not true about the liquidation/break-up valuation methods?
A) Highly diversified companies are often valued in terms of the sum of the standalone values of their operating units
B) The calculation of such values is heavily dependent on the skill of appraisers who are intimately familiar with the operations to be liquidated.
C) Assets can sometimes be liquidated in an orderly fashion.
D) Legal, appraisal, and consulting fees may comprise a substantial share of the total proceeds of the sale of the assets
E) The liquidation value of most of the firm's assets is about the same.

Question

Quizplus · Accepted Answer

The statement that the liquidation value of most of the firm's assets is about the same is not true. The value of different assets can vary widely when they are sold individually, and the liquidity discount that applies to most assets means that the liquidation value tends to be lower than the value if the assets were sold as a going concern. The other statements are generally true about the liquidation/break-up valuation methods.

Which of the Following Is Not True About the Liquidation/break-Up