Series 79 practice questionmediumPrecedent Transaction Analysis
Why might the multiples from precedent transactions completed during a bull market be less reliable for current valuation purposes?
- AThey reflect higher interest rates
- BThey are more likely to include distressed deals
- CThey always have lower control premiums
- DThey may reflect inflated valuations due to market conditions✓ Correct answer
Explanation
Why D — They may reflect inflated valuations due to market conditions
Bull market multiples can be inflated by optimistic sentiment, making them less reliable. Assuming they’re always lower or controlled by interest rates ignores real market dynamics.
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