Valuation Analysis of a Closely – Held Business : Case Study of an Indian Industry

The primary purpose for which the valuation of Redmond Pro Printing, Inc. was to value 100 per cent control interest of equity for charitable contribution. As the company is closely held and no interest to market the company or its assets, the capitalization of earning method based on a normalized cash flow income stream has been adopted as the most appropriate method of valuation of equity. The researcher for the purpose used databases of sales of controlling interests in closely held businesses. Databases reviewed are, Bizcomps, Done Deals, Pratt's Stats, and the IBA Market Comparison Database. At the same time, the economic outlook in general of US and the outlook of the specific industry in particular and that of Florida region is considered. The capitalization rate arrived in the pertinent case is 15.25 per cent, after due adjustment of long term sustainable growth rate of 2.61 per cent, and industry risk premium; size premium; company specific risk, to the 20 year US treasury bond rate of 2.48 per cent. As arrived, the indication value under the capitalization method of earnings was $ 8,832,960 which included non-operating asset values for excess cash ($813,960), a home town ($600,000-including art work of $69,600) or a total of $ 1,482,960. A small discount for lack of marketability of 5 per cent was applied to this indicated control value to arrive at $ 8,300,000 (rounded) non-marketable value