Problem: You have a business you are considering selling. There are several ways to determine the firm's worth. Based on the following data, which method would merit you the most for your business?
Current annual profits were $2,400,000
Your current stock is $21.00 per share
There are 31,000 outstanding shares of stock.
Your stock has earned $14 this past year, and
Average net income over five years $820,000
Consider in this calculation,
- Price/Ratio Method,
- Outstanding Share Method, and
- The Conservative Rule of Thumb method.
Please show work for each of these methods and identify, based on your work, which method yield the most for your business.