Certified Valuation Analyst CVA Valuation Approaches and Methodologies 3

Question 1

The guideline public company method falls under which valuation approach?

Accepted Answer

Market approach

Answer

Income approach

Answer

Asset approach

Answer

Cost approach

Question 2

Which multiple is most commonly used in the guideline transaction method for closely held companies?

Accepted Answer

MVIC/EBITDA

Answer

Price/Sales for retail only

Answer

Book value per share

Answer

Dividend yield

Question 3

When selecting guideline companies, the analyst should prioritize firms that are:

Accepted Answer

Similar in industry, size, and risk profile

Answer

Located in the same building

Answer

Audited by the same accounting firm

Answer

Founded in the same year

Question 4

A control premium is typically applied when the valuation derived from public company multiples needs to reflect:

Accepted Answer

A controlling ownership interest

Answer

A minority, non-marketable interest

Answer

Liquidation value

Answer

Tax basis only

Question 5

In the market approach, why is EBITDA often preferred over net income for comparison?

Accepted Answer

It removes effects of capital structure, taxes, and depreciation policy

Answer

It always produces a higher value

Answer

It is required by GAAP for valuations

Answer

It includes one-time gains

Question 6

A practical challenge of the guideline transaction (merged and acquired) method is that:

Accepted Answer

Transaction details are often private and incomplete

Answer

Public data is always perfectly comparable

Answer

It cannot use any multiples

Answer

It ignores the subject company entirely

Question 7

When applying a selected multiple to the subject company, the analyst should apply it to:

Accepted Answer

A normalized, comparable financial metric of the subject

Answer

The subject's gross book value only

Answer

The largest reported single-year figure

Answer

The industry average regardless of the subject