Chapter 1

Valuation Case Study Exercises


The purpose of this chapter is to highlight and discuss important concepts in valuation through a series of exercises. These exercises have been intermittently placed in excerpts of a valuation report. You should attempt to complete these exercises as you read the report with reasoning and emphasis on an explanation of your conclusion. The authors’ solutions to these exercises can be found in Chapter 2.

The following case presents selected excerpts from a business valuation report that, in its entirety, was in full compliance with the AICPA’s Statement on Standards for Valuation Services No. 1 and the Uniform Standards of Professional Appraisal Practice. For more information on reports and standards compliance, see Chapters 10 and 11 of Financial Valuation: Applications and Models, Third Edition. This report format is one of many that analysts can use in presenting business valuations. All schedules have been omitted as they are not necessary for the exercises. Some of the terms, numbers, sources, and other data have been changed for ease of presentation.


August 20, 20X8

Mr. Tom Profit

LEGGO Construction, Inc.

123 Builders Drive

Anycity, Anystate 54321

Re: Fair Market Value of 5,000 Common Shares of LEGGO Construction, Inc. as of August 20, 20X6

Dear Mr. Profit:

At your request, Valking LLP (Valking) was retained to prepare a valuation analysis and appraisal (valuation engagement and conclusion of value) ...

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