our business is burning, hit by lightening from a thunderstorm. The media asks y

Question

our business is burning, hit by lightening from a thunderstorm. The media asks you whether you will rebuild. Thank God you have replacement coverage for your firm. Some time ago, your competitor offered to buy you out at 1.5 times book value. Your appraised value indicated the firm was worth significantly more than that, possibly three times what he was offering. Your competitor countered that your tax value on the rolls of the county courthouse indicate that the building is worth only $100,000. You laughed and reminded him that this is not close to the market value the firm would sell for in the open market. Using the following valuation techniques, what is the firm worth? Which valuation technique is valid under these pending circumstances?(book, market, tax, appraised, and replacement)

Explanation / Answer

Since the valuation is high in appraised technique. This implies that appraised Valuation technique is valid.

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