Case Interview Prep

Answer: D - Inflation-based valuation methods are not used to estimate the market value of a company.
Key Takeaway: A company’s physical assets may lose their value over time due to use although some assets such as real estate appreciate over time. Income-based assessments depend on financial and accounting tools to estimate value while asset-based assessments base the true value of the company on assets that the company has already spent money on. These assets are typically real estate, machinery, and equipment. Assets are expected to contribute to the cash flow of the company in the future. Market-based assessments estimate the true value of the company based on market indicators in what is termed as ‘comparative pricing’.