110 common errors in company valuations

Pablo Fernandez () and Andrada Bilan
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Andrada Bilan: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN

No D/714, IESE Research Papers from IESE Business School

Abstract: This paper contains a classified collection of 110 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations referred to in this paper in his capacity as a consultant in company acquisitions, sales, mergers, and arbitrage processes. We classify the errors into six main categories: 1) errors in the discount rate calculation and concerning the riskiness of the company; 2) errors when calculating or forecasting the expected cash flows; 3) errors in the calculation of the residual value; 4) inconsistencies and conceptual errors; 5) errors when interpreting the valuation; and 6) organizational errors.

Keywords: company valuation; valuation errors; valuation (search for similar items in EconPapers)
JEL-codes: G12 G31 M21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-fmk
Date: 2007-11-05
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Persistent link: http://EconPapers.repec.org/RePEc:ebg:iesewp:d-0714

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