The purpose of this analysis is to look at similar transactions and see the PREMIUMS that buyers have paid to sellers' share prices when acquiring them. For example, if a company is trading at $10.00/share and the buyer acquires it for $15.00/share, that's a 50% premium.
1. First, select the precedent transactions based on industry, date (past 2-3 years for example), and size (example: over $1B market cap).
2. For each transaction, get the seller's share price 1 day, 20 days, and 60 days before the transaction was announced (you can also look at even longer intervals, or 30 days, 45 days, etc.).
3. Then, calculate the 1-day premium, 20-day premium, etc. by dividing the per-share purchase price by the appropriate share prices on each day.
4. Get the medians for each set, and then apply them to your company's current share price, share price 20 days ago, etc. to estimate how much of a premium a buyer might pay for it.
Note that you ONLY use this analysis when valuing public companies because private companies don't have share prices. Sometimes the set of companies here is exactly the same as your set of precedent transactions but typically it is BROADER.
finance On December 1, Quality Electronics has three DVD players left in stock. All are identical, all are priced to sell at $85. One of the three DVD players left in stock, with serial #1012, was purchased on June 1 at a cost of$52. Another, with serial #1045, was purchased on November 1 for $48. The last player, serial #1056, was purchased on November 30 for$40.
(a) Calculate the cost of goods sold using the FIFO periodic inventory method, assuming that two of the three players were sold by the end of December, Quality Electronics’ year-end.