Series 79 practice questioneasyComparable Company Analysis
A comparable company analysis peer group contains a company with an unusually low EV/EBITDA multiple due to recent restructuring. How should this outlier be treated?
- AInclude it without adjustment
- BExclude it only if it is the largest peer
- CWeight its multiple more heavily
- DConsider excluding it from the calculation of median and mean multiples✓ Correct answer
Explanation
Why D — Consider excluding it from the calculation of median and mean multiples
Excluding outliers from median and mean calculations prevents skewed results. Including them can distort valuation ranges, whereas proper treatment provides a truer sector comparison.
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