CrFA CrFA Valuation & Damages Calculation

Question 1

Which standard of value is most commonly applied in U.S. shareholder dispute litigation?

Accepted Answer

Fair value

Answer

Fair market value

Answer

Investment value

Answer

Intrinsic value

Question 2

In a lost profits damages analysis, the 'but-for' scenario refers to:

Accepted Answer

The hypothetical profits the plaintiff would have earned absent the defendant's wrongful act

Answer

The company's profits after the harmful event occurred

Answer

Profits reported on the company's most recent tax return

Answer

The industry average profitability used as a benchmark

Question 3

When using the income approach to value a closely held business in a forensic context, the capitalization of earnings method is most appropriate when:

Accepted Answer

Earnings are expected to grow at a constant, sustainable rate

Answer

The company has highly volatile, unpredictable earnings

Answer

The company is in a start-up phase with no operating history

Answer

The business holds primarily real estate assets

Question 4

A discount for lack of marketability (DLOM) reflects:

Accepted Answer

The reduction in value because a private company interest cannot be quickly sold

Answer

The risk that a minority shareholder will be outvoted

Answer

Tax savings from accelerated depreciation deductions

Answer

The difference between book value and fair market value

Question 5

In calculating economic damages, the 'reasonable certainty' standard requires that:

Accepted Answer

The fact of damages and the amount both be proven to a reasonable degree of certainty

Answer

Damages be proven beyond a reasonable doubt as in criminal cases

Answer

Only the existence of damages, not their amount, need be proven with certainty

Answer

Damages must be actuarially calculated by a licensed actuary

Question 6

Which valuation multiple is most useful when comparing companies with different capital structures in a forensic business valuation?

Accepted Answer

Enterprise value-to-EBITDA (EV/EBITDA)

Answer

Price-to-earnings (P/E) ratio

Answer

Price-to-book ratio

Answer

Dividend yield