VALCOM

Question 1

Liquidation value method is an equity valuation approach that considers the salvage value as the value of the asset

Answer 1

True

Question 2

Only the market dictates appropriate rate of return for investors

Answer 2

False - only (erased)

Question 3

Bottom-up forecasting approach - Forecasts that starts from lower levels of the firm and builds the forecast as it captures what will happen to the company

Answer 3

True

Question 4

Corporate Finance mainly involves managing the firm’s capital structure, including funding sources and strategies that the business should pursue to maximize firm value

Answer 4

True

Question 5

Top-down forecasting approach is a forecast ends from international or national macroeconomic projections with utmost consideration to industry specific forecast

Answer 5

False - starts (ends)

Question 6

Under the reproduction value method, factors are age, size, and competitive advantage of the asset

Answer 6

False - replacement value method

Question 7

Liquidation value method is an equity valuation approach that does not consider the salvage value as the value of the asset.

Answer 7

False - does not (remove)

Question 8

Assets are sold strategically over an orderly period to attract and generate the most money for the assets. This is called Orderly liquidation

Answer 8

True

Question 9

Bankruptcy is the most serious type of business failure as this happens when assets become greater than liability balance

Answer 9

False - liability & asset

Question 10

Reproduction value is easy to validate despite not having comparable assets in the industry.

Answer 10

False - not easy

Question 11

Cost of capital can be computed through (a) Weighted Average Cost of Capital or (b) Capital Asset Pricing Method

Answer 11

False - model

Question 12

Earnings accretion will increase value if there are future circumstances that will affect the firm negatively.

Answer 12

False - positively

Question 13

Income-based valuation, investors consider two opposing theories: the dividend relevance theory and
the bird-in-hand theory

Answer 13

False - irrelevance

Question 14

There isn’t one perfect method to determine a company’s value, which is why assessing a company’s future earnings has some drawbacks

Answer 14

True

Question 15

The Income based approach is favorable since it is easy to apply and makes use of real-world transactions to derive a value. If a business is worth what someone is willing to pay for it, then the market approach is the most appropriate methodology to determine that value

Answer 15

True

Question 16

Discounted cash flows analysis is meticulous but more conservative method or approach that can be used to determine the asset value for it clearly demonstrate the movement of the transactions.

Answer 16

True

Question 17

Discounted cash flows analysis is meticulous but more conservative method or approach that can be used to determine the asset value for it clearly demonstrate the movement of the transactions.

Answer 17

True

Question 18

Reproduction value is used for business ventures that are using highly specialized equipment in their operations

Answer 18

True

Question 19

Business failure is the most common reason why businesses close or liquidate. Early symptoms of business failure are low or negative returns

Answer 19

True

Question 20

In determining the value of equity, it is necessary to value the asset first.

Answer 20

True

Question 21

The following statements are correct for the Economic Value Added (EVA), except:
a. The most conventional way to determine the value of the asset is through its economic value added.
b. Economic value added (EVA) is a convenient metric in evaluating investment as it quickly measures
the ability of the firm to support its cost of capital using its earnings.
c. EVA is the excess of the company’s equity after deducting the cost of capital.
d. The general concept here is that higher EVA is better for the firm

Answer 21

c. EVA is the excess of the company’s equity after deducting the cost of capital.

Question 22

The beta in Capital Asset Pricing Model is

a. use to represent volatility/risk of the market

barbitrary systematic risk coefficient

c. the pricing multiple used to compute for the cost of capital

d. the credit spread/debt premium added to risk free rate.

Answer 22

c. the pricing multiple used to compute for the cost of capital

Question 23

These transactions are considered risks that may affect further the ability to realize the projected earnings.

earning accretion or dilution b. equity accretion or dilution

c. equity control premium

d. precedent transaction

Answer 23

D

Question 24

In sensitivity analysis, this factor will reduce value if there future circumstances that will affect the firm negatively.

a. earning accretion

b. earning dilution c. earning increments

d. earning decrements

Answer 24

B

Question 25

This is the situation where liquidation value is considered when Insolvency happens which means when a company cannot pay liabilities as they come due. a Business Failures b. Divestment c. Corporate End of Life d. Depletion of scarce resources

Answer 25

A

Question 26

Which statement is not correct about liquidation value? a. Liquidation value refers to the value of a company if it were dissolved and its assets sold individually. b. in some texts, liquidation value is also known as business closing value. c. Liquidation value may continue to erode based on the time frame available for liquidating assets. d. if liquidation value becomes higher compared against going concern value, this may signal that a significant business event transpired which makes the liquidation value more

Answer 26

D

Question 27

Which of the following is not a type of non-cash charges that are included d in the co computation of net income? a. Depreciation b. Amortization c. Impairment of pension assets d. After-tax interest expense

Answer 27

C

Question 28

This will serve as the dashboard to enable the modelers to analyze the results and to facilitate the readers' appreciation on the results of the project. a. Data Key Results b. Title Page c. Cover Page d. Assumption Sheet

Answer 28

A

Question 29

These are business opportunities that has long-term to infinite operational period. a. Going Concern Business Opportunities b. Perpetual Business Opportunities C. Stable Business Opportunities d. Strategic Business Opportunities.

Answer 29

A

Question 30

The following methods are NOT income-based valuation technique except a. Economic Value Added, Capitalizing current earnings and discounted future earnings b. Economic Value Added, Capitalization of earnings method and discounted cashflow method c. Economic Value Added, Capitalizing past earnings and discounted cashflow approach d. Economic Value Added, Discounted Cashflow and Revenue Approach

Answer 30

B

Question 31

What method is appropriate in valuing assets which do not have available external information even after consulting with appraisers? a. Book value method b. Replacement value method c.Reproduction value method d. Liquidation value method

Answer 31

C

Question 32

When determining replacement costs of assets, valuators tend to consult with a. Actuaries b. Board of Directors c. Appraisers d. Equity Analysts

Answer 32

C