I got this interesting question today - why do you use the median comparable company multiple to apply to the company you are valuing? The interviewer kept probing "but why the median - why not the high or the low?" It seemed like a simple question but I'm not really sure what answer he was looking for.
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He probably just wants you to say "to toss out any outliers that may be special situations - ie. pending acquisition, distressed capital structure, etc"
Wouldn't this be a simple answer of "its the most realistic"? Statistically, taking the median would ignore outliers (in this case, both overvalued and undervalued companies) and give a more sound valuation.
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