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In this session, we talked about the challenges of valuing private company, especially when the buyer is undiversified and cares about liquidity. We argued that you need to adjust for the lack of diversification in your discount rate (using a total beta). If you are interested, I do have total betas, by sector, on my website and you can find the data here:
http://www.stern.nyu.edu/~adamodar/pc/datasets/totalbeta.xls
We also talked about dealing with the lack of liquidity with an illiquidity discount, which should vary across companies, buyers and time. We also showed why the value to a private buyer will be lower than to a public buyer, and that this can lead to shifts in ownership of assets over time. I am also attaching the weekly challenges (two, but very simple) for the week.
Start of the class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/pvtcotest.pdf
Slides: http://www.stern.nyu.edu/~adamodar/podcasts/valspr21/session20slides.pdf
Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20Dtest.pdf
Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/eqnotes/postclass/session20Dsoln.pdf
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