CVA Online Practice Questions and Answers

The same general processes and decision criteria apply to both (1) deciding on whether or not to rely on any particular valuation multiple at all and (2) deciding on the relative weight to be accorded each valuation multiple ultimately used in reaching the opinion of value. A study of the transactional data may lead to greater of lesser reliance on certain valuation multiples than one might have expected prior to compiling the data a. All of the following are considered in impact of guideline transactional data evaluation EXCEPT:

A. Number of data points available

B. Comparability of data measurement

C. Comparability of data patterns

D. Apparent business reliance

Factors affecting the value of preferred stock are all of the following EXCEPT:

A. Stated dividend rate and the risk associated with payment of it

B. Cumulative versus noncumulative dividends

C. Lack of marketability discount

D. Redemption privilege

The most common forms of redemption provisions found in privately held companies are as follows. Which of the following is NOT out of the common forms of redemption provisions?

A. The entire issue is redeemable at the option of the issuing corporation at a specified price over a designated time period. These types of issue are commonly referred to as callable.

B. The entire issue is redeemable at the option of the issuing corporations at a changing price contingent upon a certain event.

C. Future redemption by the issuing company is mandatory and based on a specific redemption schedule.

D. Future issues have sinking funds provisions similar to vehicle by which bonds are retired at intervals up to their maturity dates and are referred to as sinking fund preferred.

The amount of detail desired in the inventory list varies from one appraisal to another, depending upon:

A. The inventory's importance to the valuation conclusion

B. The company's write-down value

C. To the extent to which inventory accounting methods vary within particular industry

D. The amount of inventory data to be gathered

The advantages of the binomial model over the Black-Scholes model and its variations include:

A. The binomial model's ability to incorporate a variety of conditions which can increase accuracy, including variations in expected volatility, dividends rates and risk-free discount rates as well as transaction costs.

B. The binomial model can be quite useful for valuing employee stock options as it is possible to include potential dilution, blackout periods, delayed vesting provisions, early exercise patterns and employee turnover in the model by increasing the number of periods and adjusting the option values at each node.

C. Binomial model does not require more computations

D. Binomial Model does not have any liquidity problem

A single rule of thumb that, for example, a satisfactory ratio is 2.0:1 is not widely followed in determining the current ratio, because of vastly different conditions typical in various industries, such as accounts receivable and collection periods and inventory turnover periods. As with most ratios, the adequacy of the current ratios for the given company can be better gauged by:

A. Percentage of sales and total assets

B. Comparison with industry norms than by comparison with any absolute standard

C. Comparison with a market leader than by comparison with any absolute standard

D. Comparison with a market leader than by comparison with industry norms

Beta is a factor used to measure:

A. Systematic risk

B. Unsystematic risk

C. Impact of size effect on risk

D. Equity risk premium

If one assumes that the business will continue indefinitely as a viable going concern after the number of years for which discrete projections were made, the procedure/s commonly used to estimate the terminal value at the end of discrete projection period is/are:

A. Capitalization of ongoing economic income

B. An estimated market multiple of the economic income projected for the last year of the discrete projection period

C. Discounted net cash flow available to equity

D. Perpetual growth model using net flow available to equity

____________ is the flip side of discounts, which can be added for a variety of factors, such as control, industry risk, or a swing vote.

A. Premiums

B. Combined discounts

C. Contingent liability discounts

D. Blockage discounts

Because of the advanced features (protected by the several patents), Seller management estimates that:

A. Seller sells more widgets than it otherwise would

B. Seller has a greater market share than it otherwise would

C. Seller's average selling price per unit is higher than its competitors' prices

D. Seller has short-term supply contract supply contract with the key supplier