Answer of Explanation:
Following are seven reasons why valuation of privatized businesses are more difficult in a developing country:
- Future cash flows can not be estimated accurately and its competitors might be far away or their might be no competitor in this market.
- Developing countries don't have sufficient data related to industry players operating in the area of firm that has to be valuated. The data that will be missing would be the market share and market growth etc.
- The exchange rate will be changing very significantly that it poses significant question mark on the accuracy of the valuation of business.
- The level and type of funding that can be used to flourish business is doubtful. This means we don't know if anyone is willing to lend us money and how much the lending will cost to the company.
- The risk associated with the business is also doubtful.
- The economic situation are uncertain which means we don't know the future of the business.
- The part of business might be controlled by the government which might result in a control conflict in the future.