CPFM Corporate Valuation Methods 5

Question 1

Asset-based valuation determines firm value primarily by:

Accepted Answer

Summing the fair value of assets less liabilities

Answer

Forecasting future free cash flows

Answer

Applying peer trading multiples

Answer

Discounting expected dividends

Question 2

Liquidation value is most relevant when a company is:

Accepted Answer

Financially distressed or being wound down

Answer

A high-growth technology startup

Answer

Generating record profits

Answer

Expanding into new markets

Question 3

A sensitivity analysis in valuation is used to:

Accepted Answer

Show how value changes when key assumptions vary

Answer

Eliminate the need for a discount rate

Answer

Guarantee a single precise valuation

Answer

Replace the income statement

Question 4

In a sum-of-the-parts (SOTP) valuation, a diversified conglomerate is valued by:

Accepted Answer

Valuing each business segment separately and adding them

Answer

Applying one blended multiple to total revenue

Answer

Using only the largest segment's value

Answer

Ignoring segments with low margins

Question 5

Which scenario would most likely justify a valuation premium over comparable trading multiples?

Accepted Answer

Expected synergies in an acquisition

Answer

Declining market share

Answer

Rising cost of capital

Answer

Loss of a major customer

Question 6

Free cash flow to equity (FCFE) differs from FCFF in that FCFE:

Accepted Answer

Is after interest and net debt repayments, belonging only to shareholders

Answer

Includes all debt and equity claims

Answer

Ignores taxes entirely

Answer

Is always larger than FCFF

Question 7

Best practice in corporate valuation is to:

Accepted Answer

Triangulate value using multiple methods rather than relying on one

Answer

Use only the highest valuation produced

Answer

Rely exclusively on book value

Answer

Avoid any market-based comparison