Certified Valuation Analyst Business Valuation Concepts 3

Question 1

The three generally accepted approaches to business valuation are the income, market, and:

Accepted Answer

Asset (cost) approach

Answer

Discount approach

Answer

Comparable transactions approach

Answer

Regression approach

Question 2

Capitalization of earnings is most appropriate when a company's future benefit stream is expected to:

Accepted Answer

Grow at a stable, constant rate

Answer

Be highly erratic year to year

Answer

Decline to zero soon

Answer

Vary with no discernible pattern

Question 3

In the capitalization formula, the capitalization rate equals the discount rate minus the:

Accepted Answer

Long-term growth rate

Answer

Tax rate

Answer

Inflation premium

Answer

Size premium

Question 4

A discounted cash flow (DCF) model is preferred over single-period capitalization when:

Accepted Answer

Cash flows are expected to vary over a projection period

Answer

Earnings are perfectly stable

Answer

No projections are available

Answer

The firm is in liquidation

Question 5

In the guideline public company method, valuation multiples are derived from:

Accepted Answer

Publicly traded comparable companies

Answer

The subject's own historical cost

Answer

Liquidation auction prices

Answer

IRS table rates

Question 6

The terminal (residual) value in a DCF typically represents the value of cash flows:

Accepted Answer

Beyond the discrete projection period

Answer

During year one only

Answer

Already realized historically

Answer

Of liquidated fixed assets

Question 7

The asset approach is generally MOST appropriate for valuing:

Accepted Answer

A holding or asset-intensive company

Answer

A high-growth service firm

Answer

A profitable brand-driven business

Answer

A software startup with goodwill