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A small business venture has tangible assets of RM 660,000, liabilities of RM 40,000 and produces a net profit of RM 45,000 p. based on a turnover of...
A small business venture has tangible assets of RM 660,000, liabilities of RM 40,000 and produces a net profit of RM 45,000 p.a. based on a turnover of RM 490,000. The business has a ROI of 7% and the multiplier used is 1.4. Intangible assets are valued at RM 30,000.
a. Calculate the purchase price for this enterprise using each of these methods:
- book (asset) value
- market value (revenue multiplier)
- return on investment
b. Discuss the most appropriate mechanism to determine the value of a business venture for seller and buyer respectively.