Private Company Valuation (2024 Level II CFA® Exam – Equity – Module 6)

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Topic 5 – Equity
Module 6 – Private Company Valuation
- LOS : Contrast important public and private company features for valuation purposes.
- LOS : Describe uses of private business valuation and explain key areas of focus for financial analysts.
- LOS : Explain cash flow estimation issues related to private companies and adjustments required to estimate normalized earnings.
- LOS : Explain factors that require adjustment when estimating the discount rate for private companies.
- LOS : Compare models used to estimate the required rate of return to private company equity (for example, the CAPM, the expanded CAPM, and the build-up approach).
- LOS : Explain and evaluate the effects on private company valuations of discounts and premiums based on control and marketability.
- LOS : Explain the income, market, and asset-based approaches to private company valuation and factors relevant to the selection of each approach.
- LOS : Calculate the value of a private company using income-based methods.
- LOS : Calculate the value of a private company using market-based methods and describe the advantages and disadvantages of each method.

[vedhavyas]

Sir hope you make a video on employee compensation too

[tanishqagrawal]

FCFF method formula seems wrong. In FCFF, Post tax interest should be added back.

[erfa]

At 22:09 you stated that the equity discount is estimated as 1 - [(1-DLOC)(1-DLOM)] but in the last example (1:09:50) you just sum the two discounts, could you clarify which method is generally expected in the exam?

[gordonjai]

Thanks for the video, however there are some calculation errors in the slides, especially in the example starting from 56:09 and also the terminal value at 58:57

[AR-Race]

The after tax interest expense calculated doesn't make sense (35:50). Surely it should be 10% of the 5m par value? Or some increasing value of debt. It seems to be calculated as a % of depreciation.