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by Walking At Nights » Tue, 29 Nov 2011 12:13 am
Just my thoughts, there are 3 possible ways:
1. Market based price. This is a price determined for your target business based on the prices of similar businesses, of the same product or services, size, balance sheet, and location, sold in the immediate past, say in the last 1 year.
2. Profitability. This is based on the discounting of the future cash flow projections you believe you can achieve from the target business, taking into account planned changes and expenditure, market competition and demand, etc.
3. Net Realisable Value. This is based on the net asset of the business at year, i.e. the assets of the business minus all their liabilities at year-end. However, remember that you may need to adjust the balance sheet, prior to determining the net asset of the business, to account for commitments not capitalized as a liability in the balance sheet and assets that are no longer recoverable, such trade receivables not collectible or equipments not longer useable.