Series 79 practice questionmediumValuation Methods
In a sum-of-the-parts valuation, why might an industrial conglomerate be worth more in pieces than as a whole?
- ADifferent divisions may deserve different peer sets and multiples that are obscured inside a blended trading multiple✓ Correct answer
- BConglomerates cannot issue debt
- CTax rates disappear in a break-up analysis
- DOnly private companies can be valued by parts
Explanation
Why A — Different divisions may deserve different peer sets and multiples that are obscured inside a blended trading multiple
Different divisions may deserve different peer sets and multiples that are obscured inside a blended trading multiple A blended public multiple can understate the value of a higher-growth or higher-margin segment buried inside a diversified company. Bankers use SOTP to reveal hidden value when businesses have distinct economics and investor audiences.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 477+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Related Collection, Analysis & Evaluation of Data questions
- Which of the following is the strongest reason to rely more heavily on a DCF than on precedent transactions?
- A banker is selecting comparable companies. Which factor is most important to keep constant besides industry, size, and…
- In a DCF, final-year unlevered free cash flow is $56 million, the perpetual growth rate is 4%, and WACC is 10%. Which…
- Which statement about WACC in a DCF is correct?