CVA Economic and Industry Analysis Flashcards
7 cards from real Certified Valuation Analyst practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 CVA Economic and Industry Analysis flashcards as text
Under the income approach, which economic indicator most directly informs the long-term growth rate assumed in a Gordon Growth terminal value?
Answer: Expected long-run nominal GDP growth
A sustainable terminal growth rate is typically anchored to expected long-run nominal GDP growth, since no firm can outgrow the economy indefinitely.
A rising 10-year Treasury yield, all else equal, has what effect on a business's value under a DCF model?
Answer: Lowers value by raising the discount rate
Higher risk-free rates increase the discount rate, reducing the present value of future cash flows.
Which Porter's Five Forces element is most heightened when an industry has low switching costs and many comparable substitutes?
Answer: Threat of substitutes
Low switching costs and abundant comparable products directly raise the threat of substitutes.
When analyzing a cyclical industry, why should an analyst normalize earnings over a full business cycle?
Answer: To avoid over- or under-valuing based on a peak or trough year
Normalizing over a cycle prevents distortion from using an unrepresentative peak or trough year.
Which source is generally considered the most authoritative for macroeconomic outlook data in a U.S. valuation report?
Answer: Federal Reserve and Congressional Budget Office forecasts
Federal Reserve and CBO publications are recognized authoritative sources for U.S. macroeconomic forecasts.
An industry with high fixed costs and significant excess capacity is most likely to exhibit which competitive characteristic?
Answer: Intense price competition and rivalry
High fixed costs plus excess capacity drive firms to cut prices to fill capacity, intensifying rivalry.
In industry life-cycle analysis, the 'maturity' stage is typically characterized by what?
Answer: Slowing growth, market saturation, and margin pressure
Maturity features saturated demand, slower growth, and competitive pressure on margins.
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