Which of the following is listed as a method to value a company?

• A. Precedent transactions
• B. Debt refinancing
• C. Tax credits
• D. Patent filings

Answer: (A)

Precedent transactions involves valuing a company by looking at prices paid in similar, recent M&A deals. The idea is to answer what a buyer would have paid for a business like this, based on actual market transactions. You gather a set of comparable deals, pull the transaction multiples they implied (such as enterprise value to EBITDA or enterprise value to sales), and then apply those multiples to the target’s metrics to estimate its value. This approach captures the price buyers have been willing to pay, including any control premium and strategic value, and it reflects real market demand at the time. It works best when there are enough relevant, recent deals and the target closely resembles those comparables; it becomes less reliable if there aren’t good matches or if one or two deals skew the multiples.

Debt refinancing, on the other hand, is a financing move that reshapes how a company is funded rather than providing a market-based price for the whole business. Tax credits affect cash flows and after-tax profits but don’t by themselves establish a company’s value. Patent filings relate to protecting an idea or technology and can influence value only insofar as they affect future cash flows or risk, not as a standalone valuation method.