CFA Level 2 | Equity: Excess Earnings Method

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CFA Level 2
Topic: Equity Valuation
Reading: Private Company Valuation
The Excess Earnings Method (EEM) is used to value intangible assets and small private businesses.
In the CFA Level 2 syllabus, this is covered in the reading Private Company Valuation under the topic Equity Valuation.
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[@kebeiloesello9123]

You are a beast man! I have got nothing but gratitude for what you shared with us!

[@PK-vc4ej]

Fabian Sir, you are an awesome teacher, you have an art to explain the concept in the simplest possible way. BIG THANK YOU!!

[@johnnywong9652]

thanks

[@chandanaanil2249]

Loved it, thanks!

[@yyman9100]

Great explanation!! Thanks Fabian for the reminder that normalised earning should be upcoming year!!

[@FabianMoa]

No problem!

[@slmoe9236]

Thank you for the clear explanation Fabian. This said, I have a question about the real life application of the excess earning method. How do we estimate the required return for working capital and required return for fixed assets ?

[@FabianMoa]

You're welcome, SL! The estimation of the required return for working capital and fixed assets have been issues of debate. Industry average uses 8-10%