TABLE 4.7
Comparison of Free Cash Flow Valuation to the Method of Multiples
Comparable Valuation Methods
(F)
Comparable
(D)
(E)
Industry
(A)
(B)
(C)
Comparable
Comparable
Transaction
Firm Beta
Industry Beta
Market Beta
Company
Transaction
(N
=
38)
Panel A: Summary statistics for valuation errors1. Median
6.00%
6.20%
2.50%
−18.10%
5.90%
−0.10%
- Mean
8.00%
7.10%
3.10%
−16.60%
0.30%
−0.70%
- Standard deviation
28.10%
22.60%
22.60%
25.40%
22.30%
28.70%
- Interquartile range
31.30%
23.00%
27.30%
41.90%
32.30%
23.70%
- Asset beta (median)
0.81
0.84
0.91
Panel B: Performance measures for valuation errors1. Pct. within 15%
47.10%
62.70%
58.80%
37.30%
47.10%
57.90%
- Mean absolute error
21.10%
18.10%
16.70%
24.70%
18.10%
20.50%
Mean squarred error
8.40%
6.70%
5.10%
9.10%
4.90%
8.00%
67
CAPM-Based Valuation Methods