Homework Help: Econ(again)

Posted by Joey on Sunday, January 21, 2007 at 3:20pm.

When state-owned enterprises are sold, how should their values be established? Should the value be based on the cost of the assets in place, the past earning power of the enterprise, or the future earning potential in a competitive economy?

The value should be established by competitive bidding. Accountants of the various bidders will consider future earnings potential and the value of assets in place. Past earning power is not as important, unless it is a stable "cash cow" business.

All three are important. The value should be established by competitive bidding, but the enterprise being aold also needs a clear idea of what is worth before accepting an offer. (Most will ask for more). Accountants of the various bidders will consider future earnings potential and the value of assets in place above all. Past earning power is not as important, unless it is a stable "cash cow" business.

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