Certified Valuation Analyst CVA Valuation Approaches and Methodologies 5

Question 1

A discount for lack of marketability (DLOM) is applied to reflect:

Accepted Answer

The difficulty of quickly selling an interest in a closely held company

Answer

A controlling shareholder's premium

Answer

The risk-free rate

Answer

The company's tax position

Question 2

A discount for lack of control (minority discount) is appropriate when valuing:

Accepted Answer

A non-controlling ownership interest

Answer

A 100% controlling interest

Answer

Publicly traded index funds

Answer

A liquidating estate's cash

Question 3

When two or more valuation approaches yield different indications of value, the analyst should:

Accepted Answer

Reconcile and weight the results based on reliability and relevance

Answer

Always average them equally

Answer

Choose only the highest value

Answer

Discard the income approach automatically

Question 4

The standard of value known as 'fair market value' assumes:

Accepted Answer

A hypothetical willing buyer and willing seller, neither compelled to act

Answer

A specific strategic buyer paying synergies

Answer

A forced liquidation

Answer

The most optimistic buyer available

Question 5

Which premise of value assumes the business will continue operating into the future?

Accepted Answer

Going concern

Answer

Orderly liquidation

Answer

Forced liquidation

Answer

Replacement cost

Question 6

Strategic (synergistic) value typically differs from fair market value because it includes:

Accepted Answer

Synergies specific to a particular buyer

Answer

A mandatory lack-of-marketability discount

Answer

Only liquidation proceeds

Answer

The risk-free rate of return

Question 7

The level of value chart helps the analyst determine which premiums or discounts apply by clarifying:

Accepted Answer

Whether the interest is controlling/minority and marketable/non-marketable

Answer

The company's depreciation schedule

Answer

The applicable sales tax rate

Answer

The number of guideline companies