NACVA NACVA Certifications CVA Questions & Answers

• Question 111:

  The practical effect/s of Special Valuation Rules is/ are:

  A. Cumulative dividends or distribution rights

  B. Non-voters having voting rights

  C. Flexible and optional redemption rights

  D. Non-lapsing conversion rights

  Correct Answer: AD

• Question 112:

  Which of the following is NOT out of the characteristics that must be present in a transaction while valuing recapitalizations and senior equity interests under Section 2701?

  A. The retained security must be a class senior to the transferred junior security

  B. The subject securities (both the retained senior preferred and transferred junior securities) must be non-publicly traded

  C. The transaction must result in a transfer (directly or indirectly) between members of the family

  D. The transfer is a proportionate transfer of all senior and junior equity interests and, as mentioned the transferor must retain a senior equity interest.

  Correct Answer: D

• Question 113:

  "In computing the book value per share of stock, assets of the investment type should be revalued on the basis of their market price and the book value adjusted accordingly." This statement explains:

  A. Weight to be accorded various factors

  B. Revenue ruling

  C. Average factors

  D. restrictive agreements

  Correct Answer: B

• Question 114:

  It is advisable to emphasize that in the valuation of the stock of closely held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the market value should be considered. The following factors, although not all--inclusive are fundamental and require careful analysis in each case EXCEPT:

  A. The nature of the business and the history of the enterprise from its inception

  B. The economic outlook in general and the condition and outlook of the specific industry in particular

  C. The earning capacity of the company

  D. The income-tax paying capacity of the company

  Correct Answer: D

• Question 115:

  Fair market value is defined as the price at which the property would change hands between a willing buyer and a willing seller when:

  A. Parallel regulation is there

  B. Parties have sufficient knowledge base

  C. Neither is under any compulsion to buy, or to sell, both parties having reasonable knowledge of the facts

  D. Courts have final jurisdiction over tax matters

  Correct Answer: C

• Question 116:

  There is a general consensus among appraisers that there is little or no difference in controlling interest market values between S corporations and C corporations under most circumstances, and that any difference depends on:

  A. Finding a seller that there may be differences in value at the shareholder level for noncontrolling interests.

  B. Finding a buyer that there may be differences in value at the shareholder level for noncontrolling interests.

  C. Finding a dealer that there may be differences in value at the shareholder level for non- controlling interests.

  D. Finding a broker that there may be differences in value at the shareholder level for non- controlling interests.

  Correct Answer: B

• Question 117:

  One of the most controversial and unsettled issues in business valuation today is, the valuation of:

  A. Corporations

  B. C corporations

  C. S corporations

  D. MNCs

  Correct Answer: C

• Question 118:

  The purpose of Erickson and Wang study was to empirically quantify the increase in selling price realized by sellers of entire companies in cases where:

  A. The buyer realizes a step-up in tax basis of the underlying assets when acquiring a "seasoned" S corporation

  B. Most acquirers do not want to purchase stock of another corporation because of the potential for liability assumptions

  C. The step-up in tax basis of the assets result in an increase in proceeds

  D. The entire analysis should be based on entire data

  Correct Answer: A

• Question 119:

  _____________________ applies option pricing methods to value economic projects, companies, and financial securities. Just as option pricing models incorporate the flexibility of option holders' decision as to whether and when to exercise an option by paying the exercise price.

  A. Corporation based valuation

  B. Valuing the built-in gains

  C. Return option valuation

  D. Real option valuation

  Correct Answer: D

• Question 120:

  Under the asset approach, the value of the corporation's investment in common stock is the common stock's fair market value on the valuation date:

  A. Less the potential income taxes payable on the sale of this stock

  B. Less the potential income taxes payable to hedge the stock

  C. Plus the potential income taxes payable on the sale of this stock

  D. Less the potential income taxes payable on short selling

  Correct Answer: A