Valuing a Privately Held Firm: The Discounted Cash Flow Method

Abstract

Determining the value of a business is critical to many managerial and ownership decisions. One situation that calls for business valuation is small business succession planning, using franchising as a business model to position for future sales. In this case, the small, prepared food firm ABC Company needs financing to expand their manufacturing capacity to meet their franchise needs in the United States, but there are many circumstances where privately held businesses need a valuation. Based on a real business situation, this case invites students to represent the firm, performing a valuation using discounted cash flow analysis to serve ABC’s loan application process.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

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