Certified Valuation Analyst Asset-Based Approach and Specialized Topics 3

Question 1

In valuing a 25% non-controlling interest, which two discounts are most commonly considered?

Accepted Answer

Discount for lack of control and discount for lack of marketability

Answer

Minority interests typically warrant a discount for lack of control and a discount for lack of marketability.

Question 2

A 'key-person discount' adjusts value to reflect what?

Accepted Answer

Dependence on an individual whose loss would harm the business

Answer

A key-person discount accounts for the risk that the business depends heavily on one critical individual.

Question 3

The excess earnings method (formula method) allocates value between which two components?

Accepted Answer

Tangible asset value and intangible (goodwill) value

Answer

The excess earnings method separates a return on tangible assets from excess earnings attributable to intangibles.

Question 4

Revenue Ruling 59-60 is most associated with valuation of what?

Accepted Answer

Closely held company stock for tax purposes

Answer

Revenue Ruling 59-60 provides factors for valuing closely held company stock, especially for estate and gift tax.

Question 5

Which factor is NOT one of the eight factors outlined in Revenue Ruling 59-60?

Accepted Answer

The optimal capital structure target ratio

Answer

An optimal capital structure target is not among the eight enumerated factors of Revenue Ruling 59-60.

Certified Valuation Analyst Practice Test