How to value a private company

I will be interning at a MM, and I expect to deal with some private companies.

How do you value a private company?

I've taken accounting and finance classes but I haven't gone over valuation much. Wall Street Prep is good so far, but it doesn't go over valuing private companies.

Thanks

Comments (144)

May 2, 2008 - 3:46am
tylderdurden, what's your opinion? Comment below:

Same way you would a public company with discounts for illiquidity. Read this over, it might help you out.

http://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/pvt.pdf

  • 1
May 2, 2008 - 11:22am
Alphaholic, what's your opinion? Comment below:

Domodaran's proxy for a private business' market risk is pretty good, provided you're dealing with a private firm with very close public comps. You take the beta of as many close comps as you can, unlever them, average them, and then relever them at the capital structure of the private firm.

http://search.freefind.com/find.html?id=8023201&pid=r&mode=ALL&query=bottom+up+beta&t=s

May 2, 2008 - 11:23am
ThirdEdition, what's your opinion? Comment below:

How would you value a company that is subscription based with less than 6 months of revenue? (Originally Posted: 03/13/2014)

How would you value a company that is subscription based with less than 6 months of revenue?

May 2, 2008 - 11:29am
Presentvalue, what's your opinion? Comment below:

How to value a non-cash flow producing asset (Originally Posted: 12/28/2015)

Interview question: How would you value a company with an asset that does not produce any revenue or cash flows, and how would you compare it to a company without said asset?

Thank you

May 2, 2008 - 11:30am
Buegie, what's your opinion? Comment below:

You can still value the CFs the asset can produce if another operator was running it. Or if we're talking about land or buildings, you can look at recent sales to get a sense of what it could be worth. The value would be incremental to the value of similar businesses without the non-core asset.

May 2, 2008 - 11:32am
Zosa, what's your opinion? Comment below:

"How would you value this business?" (Originally Posted: 02/14/2016)

I had an interview last week at a top MM PE shop in NY and they gave me a short two pager of a company and asked me to do a verbal case study. The part that threw me off was that they asked how I would value the business. There were no comps given, and basic financials were provided just as a teaser would show. It is unclear if they wanted me to give a specific valuation and create some sort of paper model, or just say something along the lines of, "Well if we knew the comps to XYZ we could value the business based on multiples of public comps or recent transactions that have happened in the space. FCF generation is consistent and yield to EBITDA is high we could also perform a DCF analysis, etc etc."

Any idea on how to approach this question or any question in general when asked how you would look at valuation for a particular business?

Also, if someone asked you what you would pay for a company given a target IRR, how would you go about backing into an implied equity value in an interview scenario? Obviously if you had excel open this would not be that difficult, but when asked this in an interview what do you do?

May 2, 2008 - 11:37am
Greg Marmalard, what's your opinion? Comment below:

No clue if this right but it's what I would've done.

Assuming that enough information was given (i.e. growth rates and/or future margin expansion/multiples), I would start with comps and work to how I'd build the DCF maybe spending two minutes explaining the drivers and how it all goes together. After that, id start talking through the balance sheet and looking at cash then working to net debt and talk about the possibility of a LBO, I'd probably even do a paper LBO if it looked viable.

As far as the backing out an equity value, do I have the CF? I may also not be understanding what you mean.

If I have the CF then I throw those in and then start messing with the outlay until I get the target IRR (obviously Excel makes this easy) and work down to equity from EV.

If I don't have CF then no clue and I would think its impossible to get anything reliable.

May 2, 2008 - 11:39am
exemplaria, what's your opinion? Comment below:

This isn't a "book answer" question, like many in the IB analyst recruiting process are. They're not looking to see if you know to regurgitate "Comps, DCF, Precedents". Quite often, especially in the middle market, one or more of those options just aren't available to you. We did a buy-side engagement recently where the damn client kept asking for precedent transactions, and it was just a fact of life that none existed, at least with publicly available information. I think what they want is for you to pull out a data point from the information provided and say "based upon this fact, I think X method will be superior to Y method and Z method. We can attempt to use all methods but Y and Z may provide less accurate/relevant information due to (...) factors, whereas X has this going for it...

May 2, 2008 - 11:40am
tiptop101, what's your opinion? Comment below:

Depends how in-detailed they're looking for.

If they wanted detailed you could grow FCF at the rate of growth, OPS CF * (CF1 / CF0 ) and discount and get a perpetuity value. Perp value - Debt + cash. get equity value

and option two, use a 6X EBITDA multiple. bring back to equity value and value said company.

(again, this is subjective, everyone has their own way of doing it)

May 2, 2008 - 11:42am
Zosa, what's your opinion? Comment below:

What if they ask "what multiple you think is appropriate for this company?" I was also asked this and had no idea how to answer it. Again, the only thing provided was a company overview, industry overview (no comps, no multiples, nothing), basic company financials (revenue, EBITDA, FCF) and that is it.

I agree with the approach above in that you answer it walking through the logic to show which technique may be more appropriate, however what do you do in this case where they seem to want a quantitative answer? I.e. they wanted a price that I thought was "appropriate" for this company. How would you go about this?

May 2, 2008 - 11:44am
exemplaria, what's your opinion? Comment below:

It's tough to give more advice without more information. Does the fund have an industry focus, such that you might be expected to know a bit about valuation trends in that industry? You've got revenues and EBITDA, so you've got EBITDA margins, and hopefully you can infer something about growth rates either via historical financials or the industry overview. That should get you 50% of the way there. Assuming this isn't an LBO of a public company, you're rarely wrong to just say "4.5 times", maybe 5.5 if the valuation is over $1B.

May 2, 2008 - 11:46am
skdude, what's your opinion? Comment below:

They just want you to think through it. There is no "right answer" Don't talk about DCFs or comps since we never do DCFs and comps aren't always there. Obviously if the answer was as simple as comps all trade at 9x then they wouldn't ask it. Just think through drivers of LBO and what kind of multiple you could pay with the right transaction structure to hit attractive returns. Cashflow is key obviously. If your multiple is too high obviously you may be relying too much on terminal value for returns. It's all about having a pov on valuation and return drivers (e.g. is this a growth deal, a cashflow deal...)

May 2, 2008 - 11:47am
ks13, what's your opinion? Comment below:

Urgent Help - How do I value a shipping company? (Originally Posted: 08/19/2015)

I've been asked to value a crude oil shipping company, how do I go about this? Should I use a DCF or some other model? I've been given the name of the company and its publicly listed with data available.

May 2, 2008 - 11:48am
Skinnayyy, what's your opinion? Comment below:

Maybe a comparables as well?

make it hard to spot the general by working like a soldier
May 2, 2008 - 11:49am
GoodBread, what's your opinion? Comment below:

Comparables would probably be a better bet unless you're confident you can model out freight rates over the next x many years. In any case some sort of discussion of freight rates (Baltic Dirty) would be helpful. Ideally you would deep digger into the indices, perhaps making your own weighted average of ship class indices which mirrors the company's fleet.

May 2, 2008 - 11:50am
slyice, what's your opinion? Comment below:

Revenue going to be based on capacity (# of ships and respective deadweight tonnage, broken out by type of ship), utilization, and day rates / charter rates (again, going to have to be broken out by ship type). You should ideally be using a NAV since your entire company is basically a fixed life asset.

May 2, 2008 - 11:51am
Kemm, what's your opinion? Comment below:

How to value a company with no comps? (Originally Posted: 11/25/2012)

Hey guys, I am quite curious about how you guys value a company with - interesting and valuable tech, saying, new inventions - no comps, no precedent transactions- cash flow hard to project since it is extremely new

thanks!

May 2, 2008 - 11:52am
Matrick, what's your opinion? Comment below:

http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.

See my Blog & AMA

May 2, 2008 - 11:54am
Matrick, what's your opinion? Comment below:

No worries, glad to help

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing.

See my Blog & AMA

May 2, 2008 - 11:55am
Presentvalue, what's your opinion? Comment below:

How would you value a country? (Originally Posted: 12/17/2015)

Hello, Interview question: Any thoughts on good approaches to value a country?

Thanks

May 2, 2008 - 11:56am
Premia, what's your opinion? Comment below:

Isn't that what we do with gross GDP, GDP per capita, etc?

Array
May 2, 2008 - 11:58am
tipper_of_windmills, what's your opinion? Comment below:

How to Value a Brand? (Originally Posted: 10/31/2012)

Probably a stupid question but I was asked how to put a dollar value on a brand in an interview the other day and just mumbled something about comparing sales of branded products with no-name ones. Needless to say I did not get the position.

Is there a standard way to value brand power?

Best Response
May 2, 2008 - 12:03pm
torreador, what's your opinion? Comment below:

How do you value a firm?? An industry wise take. (Originally Posted: 06/05/2012)

Hey guys.. Had my ib interview at a boutique today.. I had one specific question that has been haunting me all through the day now, "How do you value a software company?" I gave an answer stating that although all 3 methodologies could be used, in case of a mature and well established firm, DCF could be used due to the stable cash flows, or else, public comps and precedent transactions valuation methods were the way to go.

I am not sure if my answer was a very good one. For the sake of fellow interview candidates and for myself, I would like to start a small activity on industry wise valuation methods.

Since we have seasoned bankers on this forum, looking forward to getting a wide range of answers.

How would you value firms in the following sectors and why?

Technology (Software), Healthcare, Telecom, Media, Sports (I know this is rare and relatively new), Reacreational companies, etc. Please do add on to the list..

May 2, 2008 - 12:04pm
swagon, what's your opinion? Comment below:

dont know about them industriez but 4 social media co's its pretty simple, just pick a number, any number between 50 and 100 will do, multiply it by EPS and that will give u the correct share value

May 2, 2008 - 12:05pm
Ovechkin08, what's your opinion? Comment below:

One thing that I've always wondered with these firms is if you should capitalize R&D to get a better understanding of the company's real ROE/ROIC. The reason I say this is that most tech firms have very few tangible assets and under US GAAP firms immediately expense R&D.

May 2, 2008 - 12:06pm
MangoBanker, what's your opinion? Comment below:

Very interested in this topic as well. I've been asked the same question regarding software companies however, mine was specifically on SaaS companies. How would you value a SaaS company such as Salesforce, Citrix, or VMWare?

May 2, 2008 - 12:07pm
farmerbob, what's your opinion? Comment below:

How do you value a....? (Originally Posted: 02/04/2012)

So I've gotten a couple versions of questions starting with, "How do you value a...". My question, is there a generic answer for anything they ask you to value?

Last question I got was, "how do you value an apartment building?" Before that, "how do you value an oil rig?"

So what are interviewer's looking for when they ask these questions? Does it matter whether it's an apartment building, gas station, casino, whatever... or is it basically the same question?

Thanks

May 2, 2008 - 12:08pm
LeeteasY, what's your opinion? Comment below:

It does - he wants you to think about special metrics and things you have to be aware of when valuing them.

For example:

Apartment Building: Large amounts of depreciation, risk of people moving out as they're private tenants (-> won't you ever use any multiple except EBITDA and upwards, maybe adjust beta if you can't find any listed comps in that area)

Gas Station: Adjust for operating leases, as the ground they're on is most likely being leased, stable cashflows, though value drivers are not gas prices but the amount of treats they sell

Whenever you get this question, think of two things:

  1. Does the type of company require any kind of adjustment in my DCF assumptions, e.g. beta, cash flows, terminal value

  2. Does the type of company affect my multiple valuation? Which kind of denominators are appropriate?

They just want to make you think.

May 2, 2008 - 12:09pm
JustADude, what's your opinion? Comment below:

what LeetesasY said is all right but I think for most interviews they are just trying to test your basic valuation skills. E.g. apartment building, you can look at the present value of the future cash flows associated with the building, look at comparable buildings, and look at previous transactions of similar buildings, etc.

May 2, 2008 - 12:11pm
oR3DL1N3o, what's your opinion? Comment below:

Never thought about it, but probably the same way you would attempt to place a value on any other asset. A ski hill can pretty much only be used for one thing, to ski. So you shouldn't have to consider what it could be worth to someone looking to build commercial/residential property. Consider what other similar ski hills have sold for, if any information is available, looking at things like $/acre purchased or $/per annual visitor (the former is probably a better measure). And probably the most straight-forward method would be to value it based on the expected cash flow you expect it to generate. I'm not going to get into the details but you can probably get a fairly good idea of how much cash a ski hill could expect to generate on an annual/seasonal basis then discount the cash flows at a proper rate. Hope that at least helps you get started. I'm sure some other monkeys on here can add to that.

May 2, 2008 - 12:12pm
oreos, what's your opinion? Comment below:

Look up the WhistlerBlackcomb IPO.

If not rate it on awesomeness and go from there, Whistler gets a 10/10.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
May 2, 2008 - 12:14pm
heloo17, what's your opinion? Comment below:

You have multiple things to consider 1) the value of the land 2) the value of the cash flows the ski hill produces

The second part is a bit trickier as you would assume the mountain can't be used in the off-season, however you need to find out what kind of operations if any they have going on during that off'season time.

Look for comps, think of large ski resorts, and see if they are public, going to the whistler IPO is a great idea, as they would have comps in there as well, id assume.

May 2, 2008 - 12:16pm
oreos, what's your opinion? Comment below:

Those who assume a ski hill can't be used in the off season are misinformed. In certain resorts (generally mid-west/coast of North America and Europe) mountain biking, hiking, paragliding and some glacier skiing is a source of revenue in the summer.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
May 2, 2008 - 12:17pm
couchy, what's your opinion? Comment below:

dood, valuation is all bull shit so heres the real answer.

whatever you can get someone to buy it for lol.

May 2, 2008 - 12:18pm
couchy, what's your opinion? Comment below:

dood, valuation is all bull shit so heres the real answer.

whatever you can get someone to buy it for lol.

May 2, 2008 - 12:19pm
NYCbandar, what's your opinion? Comment below:

I think lots of big ski resorts actually lose money or just barely break even, they're big real estate plays so don't leave that element out.

May 2, 2008 - 12:20pm
design, what's your opinion? Comment below:

I would break it down into smaller pieces. What generates revenue for the ski resort?

  1. Rentals of ski equipment
  2. Lift tickets and general admission tickets
  3. Lodging
  4. Food

This is what someone who worked on the WhistlerBlackcomb IPO told me his thought process was. He said that during buyside recruiting, the majority of the questions he was asked pertained to this deal.

May 2, 2008 - 12:21pm
[email protected], what's your opinion? Comment below:

How do you value this mug? (Originally Posted: 06/09/2011)

Hi guys, I've been lurking around the forums for some time and it's been really helpful. I had a couple interviews a while back and a question that came up was literally

"How do you value this mug?" (There was a mug on the table)

I had a difficult time answering this question. I didn't take finance in school and I come from an accounting background. I've read Investment Banking by Joshua Rosenbuam, which gave me decent understanding of valuations. But I couldn't apply any of the valuation frameworks (comparable comps, trading, & DCF) to the question. For those of you that are more knowledgeable, how would you go about answering this question?

I feel like I have a good understanding of how valuation is done conceptually through my reading, but I have a hard time with the actual application of it.

Thanks!

May 2, 2008 - 12:22pm
IlliniProgrammer, what's your opinion? Comment below:

You almost have to give a funny response to a funny question. You could give a wry grin, and say that it depends on whether you should think of it as a breakup target or a retail business. As a breakup target, it's worth $X for the clay and $X for the coffee. As a retail business, it's worth the PV of the future revenues from providing sips minus the depreciation costs.

May 2, 2008 - 12:23pm
happypantsmcgee, what's your opinion? Comment below:

As him how much whiskey is in it. Then ask how much he hates his life. Come up with a multiple that reflects the two. Done.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
  • 1
May 2, 2008 - 12:28pm
Nouveau Richie, what's your opinion? Comment below:

I would value it as follows:

-Initial price: $10
-Salvage Value: $1 in Garage Sale 10 years after purchase

-Assume the ability to drink coffee adds 5% to your overall productivity and expected bonus without coffee is $50k per year, thus expected marginal bonus due to coffee is roughly $2.5k

-Assume you could have initially put your $10 in the S&P for an expected 7% rate of return.

In dollars:

10+(2500/(1.07)^1)+(2500/(1.07)^2)+(2500/(1.07)^3)+
(2500/(1.07)^4)+(2500/(1.07)^5)+(2500/(1.07)^6)+(2500/(1.07)^7)
+(2500/(1.07)^8)+(2500/(1.07)^9)+(2500/(1.07)^10)+(1/(1.07)^10) =

*Copy/paste into Excel...*

$17,569.46

If the interview laughs at you, tell him it's "a social media mug."

“Millionaires don't use astrology, billionaires do”
  • 2
May 2, 2008 - 12:27pm
Duke4Lyfe, what's your opinion? Comment below:

I got a very similar question and my response was something like

"Comparables - how much mugs are selling for at the stores. DCF - comparing it to the price of of using a styrofoam cup every day. precedent transactions - how much you paid for the mug/have paid for similar mugs. LBO - I don't think a sponsor is going to buy this mug, so I would not pay any attention to this."

May 2, 2008 - 12:33pm
UFOinsider, what's your opinion? Comment below:

Ask him who gave him the mug

Get busy living
May 2, 2008 - 12:34pm
Argonaut, what's your opinion? Comment below:

Grab the mug and ask him what he would pay for you to give it back to him in one piece. If it's like $5 or less, smash it, give him $10 and say: you just doubled up.

More is good, all is better
May 2, 2008 - 12:35pm
maktec5, what's your opinion? Comment below:

Dude you're a fucking retard. +1 Argonaut, man you just nailed it.

Still I Rise
May 2, 2008 - 12:40pm
Schwarzmanegger, what's your opinion? Comment below:
  1. Find out how much similar mugs cost
  2. Assign a book value to that mug using the book value of similar mugs
  3. Decide that it can be used for 10 years before being completely worthless
  4. Straight line depreciation
May 2, 2008 - 12:42pm
Alibaba1045, what's your opinion? Comment below:

What are interviewers getting at when they ask how would you value company XYZ? (Originally Posted: 07/08/2014)

When they say things like, how would you value Starbucks or Apple? One interviewer said to me specifically, how would you value a parking meter company? Is this just another way of saying what are the major valuation methods, or do they want a more company-specifc analysis?

May 2, 2008 - 12:43pm
SSits, what's your opinion? Comment below:

If I was asking the question, it would be to find out how well the candidate can slice up the company, understand competitive SWOT, understand what drives earnings, distinguish past performance from future performance. Certainly not looking for a valuation number, just looking for demonstration of how you think when doing analysis.

Those who can, do. Those who can't, post threads about how to do it on WSO.
  • 1
May 2, 2008 - 12:44pm
Dingdong08, what's your opinion? Comment below:

They want to see if you know basic valuation methods. DCF, ebitda multiples, ev/ebitda, p/e, etc. If you answer one of the above they'll probably ask you to do a back of the envelope valuation or sit you in front of a computer (or give you one to take home) and value it.

Basically they want to see how you think about valuation.

May 2, 2008 - 12:47pm
cooldurg, what's your opinion? Comment below:

Its a way to see if you can actually apply the 3 main valuation methods or if you can just rattle off some memorized spiel you have about how to do a DCF or comp.

The variation I was asked began by being asked what my favorite restaurant near campus was. I picked a local deli that only had one location. He followed up with asking how I would value it. I said that a public comps would be tough to do since there aren't too many single location restaurants publicly listed, and McDonalds, Chipotle, etc. are probably being valued off different growth and business drivers. There's no right answer, I'm sure that I could have argued that those would be acceptable comps with a few adjustments and satisfied the interviewer just as well.

I said that an M&A comp might be possible as its conceivable that there's some group of PE investors who take over small restaurants like this one. He followed up asking how I would get financials since those restaurants would be private and I said that that would be extremely tough although if you're being asked to do this valuation its possible that its because you have some prior experience doing these types of deals.

I finished by saying a DCF would be the best option as this is a relatively stable and mature business thats been around for 30+ years so projecting out future cash flows would be fairly accurate. He had me then pretend that the owner of the deli hadn't kept track of any financials over the year and asked how I would get a sense for their cash flow. I responded by saying that I would have to go down and sit in the restaurant and watch how many people come in and how much they spend to get a rough estimate of daily/weekly revenue and then adjust it for the summer and winter months when students are gone. Then I'd have to estimate there expenses and I could come up with a very rough calculation of their cash flows. I think he followed up with a couple questions about what I would use for the terminal growth rate and how I would calculate WACC in this case.

Again, there's no right answer, and the follow up questions you get as you dig into the question will definitely vary depending on what you say, but I thought it would be helpful to give you the recap so you can get a general feel for what to expect. It's just to see if you actually understand what the valuations methods mean beyond just sitting there and rattling off "A DCF is an valuation method based off the present value of all future free cash flows equal to EBIT times yada yada yada......."

I've never been in a position where I was asking someone this question, but thats just my thoughts based off the sense of what I got that the interviewer wanted.

May 2, 2008 - 12:50pm
peyo212, what's your opinion? Comment below:

How Would You Value These Things? (Originally Posted: 09/23/2013)

No matter what field of finance you're in, a lot of the work you do (as well as your conversations in everyday life) is often in some way related to finding the value of something. Whether it's companies, securities, transactions, time, employees, cars, watches, or anything else I've missed, a lot of people in our industry have an innate skill/interest in valuation.

Well today, I'm going to ask you to value some things that are traditionally difficult to put a price tag on.I'd love to see your opinions on the following list in terms of dollars per year (like a salary). You don't have to have an answer for everything if you don't want. Please use dollars if possible and negative values are ok.

How I answered these questions was by asking myself: "What does having one of these things feel like in terms of an income increase?" Obviously people who make different amounts of money will have different answers, but that's part of the point.

Here's the list in no particular order:

  • A serious relationship - you don't just provide physical pleasures for each other, but legitimately help complete each other (see
    )
  • Singleness
  • Owning a house vs. renting an apartment (the former minus the latter)
  • A purely physical romantic relationship (i.e. friends with benefits)
  • The ability to speak a second language fluently
  • A best friend - this is the first person you call to celebrate successes and mourn loss
  • Owning a car
  • Having 20/20 vision
  • Marriage to someone you love
  • Marriage to someone you don't love
  • Ability to play a musical instrument at an amateur level or above
  • Ability to play a sport at an amateur level or above
  • Bachelor's degree from a top university
  • Master's degree in subject of your choice
  • Ph.D. in subject of your choice
  • Working at a job where you are happy to go to work everyday

Note: If you think something is pretty much priceless, just put a really high price tag on it like I do below. It'd also be interesting to see what "priceless" means to everyone.

And here are my opinions on how much they're be worth on an annual basis:

  • A serious romantic relationship: $75,000
  • Singleness: $25,000
  • Owning a house vs. renting an apartment: $20,000
  • A purely physical romantic relationship: $10,000
  • The ability to speak a second language fluently: $5,000
  • A best friend: $75,000
  • Owning a car: $25,000
  • Having 20/20 vision: $2,500
  • Marriage to someone you love: $100,000,000
  • Marriage to someone you don't love: $100,000,000
  • Ability to play a musical instrument at an amateur level or above: $10,000
  • Ability to play a sport at an amateur level or above: $10,000
  • Bachelor's degree from a top university: $50,000
  • Master's degree in subject of your choice: $60,000
  • Ph.D. in subject of your choice: $80,000
  • Working at a job where you are happy to go to work everyday: $50,000

Thanks in advance for your responses!

May 2, 2008 - 12:51pm
Anihilist, what's your opinion? Comment below:

Wait... you think being married to someone you don't love is worth $100mm?

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
May 2, 2008 - 12:57pm
Anihilist, what's your opinion? Comment below:

Haha, bachelor's degree from top university $ worth

People demand freedom of speech as a compensation for freedom of thought which they seldom use.
May 2, 2008 - 12:59pm
big1, what's your opinion? Comment below:

I think he means +ve values are a net gain to your life and -ve detract from you.. ie a PhD in something could be offset by earning another 80k p.a.

Offshore liffe
May 2, 2008 - 1:04pm
DickFuld, what's your opinion? Comment below:

Singleness: I don't understand this, if you're not married, it costs you nothing to be single

Owning a house vs. renting an apartment: I would say it depends on a lot of factors. I can rent the same home significantly cheaper than the cost of buying, so I would say $0

A purely physical romantic relationship: [your answer $10,000]....I think you're undervaluing this one. Let's say you can get a hooker for $200 per session that will do whatever you want. At three times per week, that comes out to $31,200 per year. If you're like me, it would cost over $70k per year. Factor in the discount for being a regular buyer, I would say I would value it at a minimum of $40K. Of course, if you want her to be only yours, I would double or triple that figure.

The ability to speak a second language fluently: [your answer: $5,000]. I'd say this is about the same for me in annual value.

A best friend: $0. Fuck people. I'll get a dog if I need a friend.

Owning a car: Whatever dealer invoice is. This is an easy one.

Having 20/20 vision: [your answer: $2,500]. I think this is about the cost of LASIK, so probably about right as a one time cost. The benefits are worth a lot more though.

Ability to play a sport at an amateur level or above: $0. Could not care less.

Working at a job where you are happy to go to work everyday: $10,000. I don't value this very highly because you can do this at a lot of places. If I don't like my job, I'll just quit and get a different one.

May 2, 2008 - 1:05pm
GMG, what's your opinion? Comment below:

Is this purely in terms of monetary gains/loss? While true a language wont revolutionise your earnings, It would (in my opinion) enrich anyone's life a lot, especially if you factor in a 3rd or 4th language.

May 2, 2008 - 1:06pm
wilder, what's your opinion? Comment below:

I'll take a stab quickly, I don't get how some of your calculations. Like the 100 million per year figure WTF or on an annual basis paying 25k per year for a car maybe you're Lamborghinis or bust or maybe I'm missing something.

• A serious romantic relationship: $20k+
From an economic standpoint maybe it cost $15k to maintain think going out, traveling, gifts etc. I would put a higher value on this because of the happiness it would give me but obviously hard to value.

• Singleness: $0
I wouldn't PAY for this since it's the default standard and I enjoy it for now.

• Owning a house vs. renting an apartment: $25k- $35k
http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r…

The NY Times actually does a good job, since as you go to premium housing your yield drops and the opportunity cost can be huge. And considering if the nicer the property the lessor will impede on you less the downsides to renting at that end of the market are fairly little. Also due to the rake of the government on stamp duties, market risk, upkeep there's also a value to be able to move around and be free of contacts which I value for now.

• A purely physical romantic relationship: $0
This links back to number two, I have this already and wouldn't pay for it, I also enjoy the 'hunt' and the process also it could potentially lead me to number one.

• The ability to speak a second language fluently: $500- $1k p language
The value in this is marginal for my job but for life I would like this traveling like learning Spanish for when I travel South America next year. Also languages are great to get a better understanding of your own language and learning other cultures. Say you wanted to be a UN translator who speak up to 30 languages and a position that pays $200k+ then maybe you could assign a higher value. I imagine the Russian/ Arabic/ Mandarin combo would have significant value on the job market as well.

• A best friend/s: $X
This is impossible to value for me as you get older I think you realize that life is made up by the people and experiences and while you can buy the experiences it gets boring quickly if you can't share that with people. Great friends with varied lifestyles, experiences who help support each other I think is the life blood of living well.

• Owning a car: $-$5k now, somewhere else $5-7k per year
Since living in London where the standard is cabs, tube and buses it's actually a hassle having a car since you have maintenance, registration, parking and the congestion charge. It saves me money having no car while not really detracting from convenience and you can use ZipCar for those small times you need one. At home (Australia) a car is needed all the time and I would spend around $35k on a car over the useful of 5-7 years give or take. This changes as income/ net worth changes basically you will pay a higher dollar amount but it will become less of your overall percentage of income.

• Having 20/20 vision: $1200
One off laser eye surgery from a top doctor is $5k? Over 30 years useful life but let's pay it off sooner say $1200 per year ($100 p month) over six years with interest. I luckily don't need it for now.

• Marriage to someone you love: $X
I value this highly. You could get creative with this and say well what is potentially 50% of your net worth post marriage? How much do you pay to keep her accustomed (future payments) and the life happiness you assign? Basically leads back to the friend's answer but if you're valuing this purely from an economic perspective I think you're doing it wrong. Being willing to sacrifice more money to try to achieve this really misses the point also it reminds me of the Oscar Wilde quote 'A man who knows the price of everything and the value of nothing'.

• Marriage to someone you don't love: $X (( -$15,000 (cost of dating) + -cost of kids + 50% of every incremental dollar you add to your net worth for every second you continue to spend together + negative life happiness + opportunity cost of meeting someone else.))

As you can see this is a huge amount of money and happiness I seriously don't know how you get your calculation but Eddie also wrote about this as well about how the best thing to do was to pay up and move on with life. (My apologies if the paraphrase is wrongly construed).

• Ability to play a musical instrument at an amateur level or above: $0
I like music but I've never been musically inclined and we are just paying for the end result and not having to go through the experience of learning an instrument and slowly getting better which I can imagine brings joy.

• Ability to play a sport at an amateur level or above: $50*10 = $500
Amateur league for most sports are like $50 a month and not played year round, I play pickup basketball for free really after I played competitive at the high school level. If you are talking professional sports even minus salary it could get interesting but as the question stands I don't think it's all that interesting.

• Bachelor's degree from a top university: $50,000+ for the life of the loan
If we are talking a top IVY let's say Harvard is $65k * 4 = $240k. But for the guaranteed opportunities that the school afford I'm guessing I would pay $400k or more supposing I could get a decent deal on the debt. One caveat if I could get the below term and get any Master's degree I wanted to I would go the cheapest U grad school with the best reputation possible.

• Master's degree in subject of your choice: $60,000
Once again let's take HBS which is basically $250k, now I would pay once again maybe $400k given the useful life is forever. More if I got to save on undergrad. This is also considering my humble net worth but if you're personally worth say 10 million plus this cost becomes insignificant to your financial independence so you would be willing to pay A LOT more.

• Ph.D. in subject of your choice: $0
This level of education isn't needed for my desired path, while it would be interesting I wouldn't pay for the experience and from what I understand most Ph.D's are paid for or maybe I'm wrong.

• Working at a job where you are happy to go to work every day: $X
This is hard, I definitely value this highly in the long term but in the short term I value money and transferable skills higher, also a very small component of brand name early in career. I would take a job that I didn't like if it paid a lot and got me to financial independence a lot quicker for example 600k vs 300k job that had more favorable conditions. Post 35 I would want a better mix of lifestyle and happiness from the job vs overall compensation. Paying 50k or X amount for a job is maybe a badly written question what if I like being GM of the Lakers that pays 1million p year? Unless you're saying that all jobs pay the same amount let's say 200k for example then how much of that would you pay to have that job? Then you would probably lean on your overall net worth and desires but let's say everyone's net worth is the same (not financially independent >500k and all jobs were max 200k then how much would you pay for a certain job I think that would make for a more interesting question.

May 2, 2008 - 1:07pm
mikesswimn, what's your opinion? Comment below:

I think this is an interesting question, here's my take:

A serious romantic relationship: $0 (N/A - married.)

Singleness: -$100,000,000 (you'd have to pay me.)

Owning a house vs. renting an apartment: $0 (I own, it's kind of a pain in the ass.)

A purely physical romantic relationship: $0 (not interested.)

The ability to speak a second language fluently: $25,000 (I'd love to instantly speak Spanish fluently. If I had to work for it, divide this number by 100.)

A best friend: $100,000,000,000,000 (my best friend is awesome.)

Owning a car: $0 (already own a car.)

Having 20/20 vision: $0 (already have 20/20, but if I lost it substantially, I'd go for the $5,000 required for laser surgery.)

Marriage to someone you love: $100,000,000,000,000,000,000 (it's pretty awesome.)

Marriage to someone you don't love: -$100,000,000,000,000 (sounds awful.)

Ability to play a musical instrument at an amateur level or above: $0 (not interested.)

Ability to play a sport at an amateur level or above: $0 (been there, it's a lot of work.)

Bachelor's degree from a top university: $0 (doesn't seem worth it at this point - too old.)

Master's degree in subject of your choice: $50,000 (roughly the cost of a masters degree - not sure if I'd pay it, but seems fair.)

Ph.D. in subject of your choice: $1,000,000 (this number assumes I become instantly smart enough to compete in the subject of my choice - I'm currently too dumb.)

Working at a job where you are happy to go to work everyday: $0 (they don't call it work because it's fun.)

Good times man, SB.

"My caddie's chauffeur informs me that a bank is a place where people put money that isn't properly invested."
  • 3
May 2, 2008 - 1:11pm
droking7, what's your opinion? Comment below:

Lol at this fucking shit.

I want good health, a chiseled body, good friends and family, good job, and everything else falls into place.

For those who said "fuck friends" or don't value being happy at work, y'all must lead some shitty ass lives.

May 2, 2008 - 1:12pm
81investment, what's your opinion? Comment below:

Private Company Financials (Originally Posted: 07/26/2017)

How does an investor looking into the bonds of a non-public company receive financial statements and other information about the company?

When I try to find it on Bloomberg the financials are not available.

Thank you in advance.

May 2, 2008 - 1:15pm
MillerLaw, what's your opinion? Comment below:

Evaluation of a private company (Originally Posted: 08/09/2015)

Hey Monkeys,

I need to evaluate a privately held company which is based in the restoring sector (restoring art and documents). As it is a small cap firm, I don't know which excel model I should use to evaluate it. The goal is to find out an estimated price for which the owner could sell his company for.

Thanks for your help :)

May 2, 2008 - 1:16pm
Distressed Industrial Buyer, what's your opinion? Comment below:

Is it a proprietorship or can the business be run without the owner? Is it long term and stably profitable? Is this a homework assignment or are you trying to sell ib services to this prospect or something else? It all depends.

Global buyer of highly distressed industrial companies. Pays Finder Fees Criteria = $50 - $500M revenues. Highly distressed industrial. Limited Reps and Warranties. Can close in 1-2 weeks.
  • 1
May 2, 2008 - 1:17pm
MillerLaw, what's your opinion? Comment below:

Hi Paladin,

The business can not be run without the owner and it is a profitable business. The company has been growing over the last 10 years and offering an outstanding service in its sector. I wanted to create an excel sheet for the owner (good friend of mine), but I don't know which model to use.

May 2, 2008 - 1:18pm
brooksfit, what's your opinion? Comment below:

You mean value the company? Why do you keep saying evaluate?

Also why not start with public comps. Try to find bigger public companies like it and public companies with market caps similar to yours that may have some similarities. It won't be too accurate but it's a start.

If it is also too small, a DCF can be done if you have his forecasts or can make some solid and defensible approximations about his future earnings and growth. If you feel adventurous, look for sale of subsidiaries within same industry and use those multiples after you scrub the premium away and such. Combine these and see if they're anywhere within each other as a check.

May 2, 2008 - 1:19pm
BigHead, what's your opinion? Comment below:

Private Company Financials - Rising junior doing an internship at a MM bank (Originally Posted: 08/03/2010)

I'm a rising junior doing an internship at a MM bank. I've been asked by my MD to be his "lead banker" on a VERY small sized deal (doing it for a friend), ie. 25K fee, but if it goes through I get some cash. I'm anxious to start researching competitors to see where they stand and who would be good target companies for them to be acquired by. I was wondering how to go about contacting these companies (which I've made a list of) to try and squeeze some financial data out of them. I have no clue what's the proper protocol on formalities such as telling them I'm from XYZ bank (don't want to look like an idiot and mess up things later on), asking directly for some financial data. etc. Thanks for the help.

May 2, 2008 - 1:20pm
acronymous, what's your opinion? Comment below:

HIGHLY recommend you do not contact companies and "discreetly" ask for financials. unfort this info is private for a reason and there's no good way to go about getting it. best way, leverage other sr bankers/professionals who may have had conversations with these type of companies in the past... they may know that info.

May 2, 2008 - 1:21pm
BigHead, what's your opinion? Comment below:

Yea that's what I figured. I just got the assignment today and the MD just said research some competitors for today. So I was going to try and do a little more by trying to just get some revenue numbers (not full statements of course) to compare them. The only thing is, this company is ultra small. The bank I work for has a minimum fee which is way higher than the fee on this deal, so nobody really has any "contacts" in this industry.

May 2, 2008 - 1:29pm
sc0513, what's your opinion? Comment below:

Valuing a private company that filed for a pre-packaged backruptcy protection (Originally Posted: 05/18/2012)

Hi,

I am wondering how to value a small unlisted distressed budget airline? The company has been reporting negative earnings for the past several years. I have an offer price in my mind but want to learn which valuation mehtodologies I should use to back up the number. Any thoughts will be greatly appreciated. Thank you.

May 2, 2008 - 1:32pm
NewGuy, what's your opinion? Comment below:

Is it EBITDA positive? If so, use a mutliple on that.

Does it have going concern value? if not, do a liquidation analysis on its assets

If it's not in structural decline and still has going concern value but is EBITDA negative, then do a multiple of revenue, or look at what EBITDA margins should be if it were operating efficiently (look at comps), approximate a cost of restructuring the business to become more efficient, and apply a multiple to that EBITDA using the aforemention margins.

Plenty of ways to do so. It's all broscience anyway brother.

May 2, 2008 - 1:34pm
prospie, what's your opinion? Comment below:

NewGuy:

Is it EBITDA positive? If so, use a mutliple on that.

Does it have going concern value? if not, do a liquidation analysis on its assets

If it's not in structural decline and still has going concern value but is EBITDA negative, then do a multiple of revenue, or look at what EBITDA margins should be if it were operating efficiently (look at comps), approximate a cost of restructuring the business to become more efficient, and apply a multiple to that EBITDA using the aforemention margins.

This is great stuff. Thanks for keeping it simple.
May 2, 2008 - 1:35pm
surferbarney, what's your opinion? Comment below:

Private Company Financials - Best way to valuate a company (Originally Posted: 03/08/2013)

Curious about the financials of a private company. What is the best way to try and locate the information I would need to valuate the company?

May 2, 2008 - 1:36pm
Dance While the Music On, what's your opinion? Comment below:

For private companies, information would be really hard to gather. Company's website should be your main source of information. Some companies offer decent research for private companies. Those are not hard to find. You could use them to help yourself get started.

Stay Strong!
May 2, 2008 - 1:37pm
Titan33, what's your opinion? Comment below:

Might be very hard for certain private companies. Since they aren't required to report out financials, some are very secretive and use that as an advantage versus competitors who are public.

May 2, 2008 - 1:38pm
Bullet-Tooth Tony, what's your opinion? Comment below:

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May 2, 2008 - 1:40pm
3334, what's your opinion? Comment below:

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"I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature."
May 2, 2008 - 1:41pm
watdo, what's your opinion? Comment below:

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May 2, 2008 - 1:43pm
3334, what's your opinion? Comment below:

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"I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature."
May 2, 2008 - 1:44pm
SearedSalmon, what's your opinion? Comment below:

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