From the course: Finance Foundations: Business Valuation
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Market approach to business valuation
From the course: Finance Foundations: Business Valuation
Market approach to business valuation
- The three primary asset valuation techniques are the market approach, the income approach, and the cost approach. The market approach uses data from market prices for identical or similar assets. For example, in determining the fair value of a share of stock, you should look at the recent selling price of similar shares of stock. And because all ownership shares for the same company are identical, the recent selling price of any share gives a good indication of the fair value of all of the other shares. The market approach works very well, perfectly in fact, for actively traded public shares in the leading stock exchanges around the world. A difficulty in using the market approach to valuing shares arises for non-public companies. For example, in October 2015 the Wall Street Journal reported a large divergence in analyst opinion about the fair value of prominent non-public companies such as Uber. For Uber analyst…
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