Valuation Midterm

Question 1

RTU Mission and Vision

Answer 1

• to provide competent and socially responsible professionals through innovative instructions, high-impact research, and sustainable extension services responsive to diverse needs to local communities
• a smart and transnational university

Question 2

Key Principles in Valuation

Answer 2

Key Principles in Valuation
1.The Value of a business is defined only at a specific point in time.
2. Value varies based on the ability of business to generate future cash flows.
3.Market dictates the appropriate rate of return for investors
4. Firm value can be impacted by underlying net tangible assets
5. Value is influenced by the transferability of future cash flows, and
6. Value is impacted by liquidity

Question 3

how much a particular object is worth a particular set of eyes

Answer 3

value

Question 4

according to the CFA Institute, _____ is a estimation of an asset’s value

Answer 4

valuation

Question 5

valuation places great emphasis on the ______ that are associated in the exercise.

Answer 5

professional judgement

Question 6

value of a business three major factors

Answer 6

current operations
future prospects
embedded risks

Question 7

value of business that shows how is the operating performance

Answer 7

current operations

Question 8

value of business that reflects what is the long term and strategic decision

Answer 8

future prospects

Question 9

value of business that hows what are the business risks involved

Answer 9

embedded risk

Question 10

assuming there is a hypothetically complete understanding

Answer 10

intrinsic value

Question 11

companies who are severe financial distress

Answer 11

liquidation value

Question 12

going concern assumption

Answer 12

going concern value

Question 13

• price express in terms of cash equivalents
• compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.

Answer 13

fair market value

Question 14

financial managers managing the investment portfolio

Answer 14

portfolio management

Question 15

person who are interested in understanding and measuring the intrinsic value of a firm

Answer 15

fundamental analysis

Question 16

refer to the characteristics of an entity

Answer 16

fundementals

Question 17

who is tend to look for companies of an entity

Answer 17

activist investors

Question 18

imply investors psychology and will predict the future movements in stock prices

Answer 18

chartists

Question 19

getting information about firms

Answer 19

information traders

Question 20

under portfolio management, the following activities can be performed through the use of valuation techniques

Answer 20

stock selection
deducing market expectation

Question 21

separating a segment or component of business

Answer 21

spin off

Question 22

sale of a major component or segment of a business

Answer 22

divestiture

Question 23

two companies combined to form a wholly new entity

Answer 23

mergers

Question 24

buying firm and the selling firm

Answer 24

acquisitions

Question 25

acquisitions of another business by using significant debt

Answer 25

leveraged buy-out

Question 26

_____ assumes that a combine value of two firms will be greater that the sum of separate firms

Answer 26

synergy

Question 27

____ deals with prioritizing and distributing financial resources

Answer 27

corporate finance

Question 28

key principles in valuation refers to business tend to change every day as transaction happens

Answer 28

the value of a business is defined only at a specific point in time

Question 29

refers to the possible range of value

Answer 29

uncertainty

Question 30

key principles in valuation refers to general concepts for most valuation techniques put emphasis on future cash flows

Answer 30

values varies based on the ability of business to generate future cash flows

Question 31

key principles in valuation refers to market forces are constantly changing, and they normally provide guidance of what rate of return should investors expect

Answer 31

market dictates appropriate rate of return for investors

Question 32

key principles in valuation refers to business valuation principles took at the relationship between operational value of an entity and net tangible of its assets

Answer 32

firm value can be impacted by underlying net tangible assets

Question 33

key principles in valuation refers to transferability of future cash flows is also important especially to potential acquirers

Answer 33

value is influenced by transferability of future cash flows

Question 34

key principles in valuation refers to the principle is mainly dictated by the theory of demand and supply

Answer 34

value is impacted by liquidity

Question 35

yield future economics benefits as a result of past transactions

Answer 35

asset

Question 36

they will grow in the future because of historical proof

Answer 36

brown field investments

Question 37

benefits of having a sound enterprise-wide risk management system

Answer 37

- manage performance of all business risks - enhance business resilience against changes - improve distribution of resources across the firm

Question 38

advantages of using asset-based methods

Answer 38

enables stakeholders to validate firm value based on the value of assets it currently own

Question 39

value recorded in the accounting books

Answer 39

book value

Question 40

receivables that are collectible after 60days

Answer 40

current assets

Question 41

net book value of assets

Answer 41

total shareholders' equity

Question 42

book value also reflects

Answer 42

historical value

Question 43

books values has its advantages except

Answer 43

validated by a third party expert with knowledge on how much assets are sold in the open market

Question 44

cost of similar assets

Answer 44

replacement cost

Question 45

affects the replacement value except

Answer 45

original acquisition cost of the asset

Question 46

value of the insurance premium

Answer 46

replacement cost

Question 47

valuators tend to consult with

Answer 47

appraisers

Question 48

difference of book value and replacement value

Answer 48

bv can be computed form the financial statements while rv is gathered by employing services of an appraiser.

Question 49

method is appropriate in valuing assets

Answer 49

book value method

Question 50

reproduction value method is appropriate except

Answer 50

business that use equipment supplied by the third party manufacturer

Question 51

reproduction value

Answer 51

estimate of cost of reproducing, creating, developing or manufacturing a similar asset internally

Question 52

limitation imposed by the use of reproduction value method

Answer 52

difficulty in validation reasonables of calculated value because of limited comparators

Question 53

show the most recent value of the firm assets

Answer 53

- replacement value method - liquidation value method - reproduction value method

Question 54

deduct the asset value

Answer 54

total liabilities