NACVA NACVA Certifications CVA Questions & Answers

• Question 181:

  Fair value is:

  A. A price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participation at the measurement date.

  B. That would be given to purchase an asset or paid to transfer a liability in an orderly transaction between market participation at the measurement date

  C. Market price on valuation date

  D. Quoted price

  Correct Answer: AC

• Question 182:

  __________________ in context of Delware block method means value based on expected earnings and/ or dividends. It is akin to value based on the income approach in the three basic approaches to value. It may be arrived at by discounted cash flow (DCF), capitalization of earnings, or capitalization of dividends.

  A. Market value

  B. Investment Value

  C. Interest on invested capital

  D. Ownership interest

  Correct Answer: B

• Question 183:

  1. Dissenting stockholder actions. 2. Minority oppression actions. Either may be accompanied by claims of breach of fiduciary duty. These are the actions brought by:

  A. Minority shareholder

  B. Majority shareholders

  C. OTC Trading

  D. Short Selling

  Correct Answer: A

• Question 184:

  There are many subtitles to the application of fair value for cooperate law purposes. For example, some states consider concepts of "entire fairness." There are following aspects of entire fairness EXCEPT:

  A. Absolute fairness

  B. Relative fairness

  C. Competence and thoroughness

  D. Reorganization

  Correct Answer: D

• Question 185:

  The most prevalent measure for assessing the likelihood of receiving future preferred dividends is the company's_________________, commonly defined as the sum of pretax income plus interest expense divided by the sum of interest expense plus preferred dividends adjusted for tax.

  A. Variable-charge coverage ratio

  B. Fixed-charge coverage ratio

  C. fixed-charge leverage ratio

  D. fixed-charge liquidity ratio

  Correct Answer: B

• Question 186:

  The primary impact on the value of a sinking fund preferred stock results from the fact that redemption creates a finite stream of income to the investor plus________________.

  A. A terminal value versus a theoretically infinite stream of income available to the nonsinking fund preferred stockholder.

  B. A negative value versus a theoretically infinite stream of income available to the nonsinking fund preferred stockholder.

  C. A terminal value versus a theoretically finite stream of income available to the nonsinking fund preferred stockholder.

  D. A positive value versus a theoretically finite earning available to the non-sinking fund preferred stockholder.

  Correct Answer: A

• Question 187:

  Which of the following factor/s is/are most important for the redemption provisions that affect their value?

  A. Call price

  B. Whether or not a sinking fund or some other means of financing the redemption is established

  C. Issuing company's financial ability to cash out the preferred shares without some sort of redemption fund.

  D. Redemption methods

  Correct Answer: D

• Question 188:

  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.

  Correct Answer: B

• Question 189:

  If a $1000 per share value of convertible bond is issued for $1000, and is convertible into 20 shares of issuer's common stock that pays no dividend, there will be no economic benefit in converting the debt to stock as long as the common stock is selling for less than $50 per share. If the bond value is indeed in the equity-equivalent region, as the value of a single share of common stock increases $1, the bond value will increase:

  A. $25

  B. $50

  C. $20

  D. $10

  Correct Answer: C

• Question 190:

  Market evidence indicated that adjustable-rate preferred stocks generally required yields in the range of ______________ basic points.

  A. 42 to 445

  B. 48-498

  C. 32-500

  D. 50-500

  Correct Answer: A