Cima F3 Exam Question No 13

Question No 13:

When valuing an unlisted company, a P/E ratio for a similar listed company may be used but adjustments to the P/E ratio may be necessary.
Which THREE of the following factors would justify a reduction in the proxy p/e ratio before use?

A. The relative lack of marketability of unlisted company shares.
B. A lower level of scrutiny and regulation for unlisted companies.
C. Unlisted companies being generally smaller and less established.
D. Control premium not being included within the proxy p/e ratio used.
E. The forecast earnings growth being relatively higher in the unlisted company.
F. A profit item within the unlisted company's latest earnings which will not reoccur.
 
Answer: A, B, C