Compared to a publicly traded firm,a comparable private firm is thought to be:
A)20% to 30% less valuable.
B)less liquid for the owners.
C)more difficult to accurately value.
D)all of the above.

Question

Quizplus · Accepted Answer

A) Private firms are known to be less valuable than publicly traded firms due to less access to capital markets and less transparency in financial reporting. The discount factor ranges from 20% to 30%.

B) Private firms are less liquid as the owners cannot sell their shares on a stock exchange; instead, they have to find a buyer privately, which can take time, effort, and cost.

C) Private firms do not have to disclose as much financial information as publicly traded firms, making it harder to value them. Private firms have unique assets, liabilities, and risks, making valuation harder.

Compared to a Publicly Traded Firm,a Comparable Private Firm Is