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A profitable company wishes to dispose ofa loss-makingdivision thatgenerated negative free cashflow in the last financial year.
The division requires significant new investment to return it to profitability.
Which of the following valuation approaches is likely to be the most useful to the company when negotiating the sales price?
Suggested Answer: C
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8 comments · newest first
GA
Gayla
12 months ago
Sounds risky to rely on future cash flows when they’re negative now.
SA
Sabra
1 year ago
Wait, why would they invest more in a loss-making division?
LA
Launa
1 year ago
P/E ratio? Not sure that’s the best choice.
HA
Hassie
1 year ago
I think the asset basis could work too.
NO
Noe
1 year ago
Discounted forecast free cashflow is key here.
MA
Marla
1 year ago
Hmm, this looks like a classic DOS executable format. I'll go with option A.
RE
Reta
1 year ago
I'm pretty sure economic risk relates to long-term changes in exchange rates affecting overall competitiveness, especially since it's about a factory abroad.
MI
Micaela
1 year ago
The wording of the options is a bit tricky, I'll need to read them closely to make sure I don't miss any important details.