CVA Valuation Approaches and Methodologies

Question 1

Which of the following is a key characteristic of the Income Approach in business valuation?

Accepted Answer

Calculates present value of expected cash flows

Answer

Based on book value

Answer

Compares similar company prices

Answer

Uses historical cost data

Question 2

What is the Market Approach in valuation primarily based on?

Accepted Answer

Market comparables

Answer

Projected cash flows

Answer

Replacement cost

Answer

Internal rate of return

Question 3

Which method under the Asset-Based Approach adjusts individual assets and liabilities to fair market value?

Accepted Answer

Adjusted net asset method

Answer

Book value method

Answer

Capitalized earnings method

Answer

Excess earnings method

Question 4

Which valuation approach is most suitable for asset-heavy companies like manufacturers?

Accepted Answer

Asset-Based Approach

Answer

Income Approach

Answer

Market Approach

Answer

Dividend Discount Model

Question 5

Which technique is commonly used under the Income Approach?

Accepted Answer

Discounted Cash Flow (DCF)

Answer

Guideline Public Company Method

Answer

Asset Accumulation Method

Answer

Comparable Transactions Method

Question 6

What is the primary limitation of the Market Approach?

Accepted Answer

Dependence on comparable market data

Answer

Overemphasis on future earnings

Answer

Requires too much historical data

Answer

Relies only on internal metrics