Join Jim Stice for an in-depth discussion in this video Valuation of a home, part of Finance Foundations: Business Valuation.
- Using price multiples to estimate the value…of a business, or another asset, is very intuitive…and it's a logical approach.…This multiple approach takes advantage…of the vast amount of information embedded…in market prices.…Let me give you an example using an asset that is near…and dear to the heart of my brother Jim and me,…the house in which we grew up.…Now the website, Zillow.com, is an online real estate…and database company.…The Zillow site contains price estimates…for millions of residential houses in the United States.…In fact, I think that the Zillow site has estimated values…for about 60% of the houses in the United States.…
Now how is it possible for Zillow to have all…of those estimates?…Does Zillow employ thousands of real estate appraisers…who go around the country and appraise houses?…No.…These Zillow estimates, which are called Zestimates,…are generated using price multiples based…on public data for recent house sales in the area…of a particular house.…Now, let's use some logic to figure out…the two most important variables to use in estimating…
Make sure to check out the Stice brothers' other accounting and finance courses to understand the other economic factors that impact your business.
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- Using market, cost, and income approaches to business valuation
- Valuing homes
- Valuing companies by multiples
- Using price-to-sales ratios to value companies
- Using discounted cash-flow analysis to estimate value
- Valuing McDonald's as a case study