NACVA NACVA Certification CVA Questions & Answers

• Question 21:

  1.

  Direct capitalization

  2.

  Yield capitalization

  These above are the two categories of valuation methods under:

  A. Capitalization excess earnings method

  B. Income capitalization approach

  C. Market capitalization approach

  D. Cost approach

  Correct Answer: B

• Question 22:

  The normalized economic income is capitalized, typically, as an annuity in perpetuity. The capitalization rate used in this procedure should be:

  A. Commensurate with the risk of investment

  B. Consistent with the measurement of net income

  C. Debt component and equity component are blended

  D. derived from the property over a discrete period of time

  Correct Answer: A

• Question 23:

  The income capitalization approach is based on the economic principles of:

  A. Risk and expected return investment analysis

  B. Anticipation

  C. Allowance of curable functional obsolescence

  D. Market value of building and improvements

  Correct Answer: AB

• Question 24:

  Which of the following is NOT out of standard categories of assets for the purposes of applying the asset accumulation method?

  A. Financial assets

  B. Tangible personal property

  C. Real estate

  D. Equity and unearned earnings

  Correct Answer: D

• Question 25:

  Normally, the business will realize the economic benefit of the prepaid expenses within the normal course of one business cycle. Therefore, normally:

  A. Revaluation adjustment is required

  B. No revaluation adjustment is required

  C. No revaluation adjustment is required with respect to recorded prepaid expenses

  D. Revaluation adjustment is required with respect to recorded prepaid assets

  Correct Answer: C

• Question 26:

  1.

  Obtain or develop a cost-basis balance sheet

  2.

  Determine which assets and liabilities on the cost-basis balance sheet require a revaluation adjustment

  3.

  Identify off-balance sheet intangible assets or contingent liabilities that should be recognized and valued

  4.

  Identify off-balance sheet or contingent liabilities that should be recognized and valued

  5.

  Estimate the value of the various asset and liability accounts identified in steps 2 through 4

  6.

  Construct a value-basic balance sheet, based on the indicated values concluded during step 1 through 5, and quantify the subject value

  All these above statements are the steps of:

  A. Asset accumulation method

  B. Asset based approach

  C. Liquidity approach

  D. Market based approach

  Correct Answer: A

• Question 27:

  When using the elements of both the asset accumulation method and the capitalized earnings method in the same valuation, the analyst should pay particular attention to the selection of:

  A. The required rates of return

  B. The capitalization rates used in the excess earning component of the valuation

  C. Identification of assets and liabilities on cost basis

  D. Both A and B

  Correct Answer: D

• Question 28:

  The determination of which asset-based method to use in a given valuation engagement should be a function of all of the following EXCEPT:

  A. The experience and judgment of the analyst

  B. The quantity and quality of available data

  C. The purpose and objective of the valuation

  D. Financial asset account categories

  Correct Answer: D

• Question 29:

  It is the collective revaluation of all of the company's assets and liabilities. This analysis is usually conducted through the application of the capitalized excess earning method. This is a general method in:

  A. Market based approach

  B. Asset based approach

  C. Liquidity approach

  D. Asset accumulation method

  Correct Answer: B

• Question 30:

  Based on the purpose and objective of the valuation, the analyst will apply the appropriate standard of value to the subject equity interest. The standard of value for the individual assets and liabilities may be different from the standard of value for the subject equity interest. For example:

  A. The analyst may apply the fair market value standard to the individual assets and liabilities even though a different standard of value is determined for the subject equity interest

  B. The asset accumulation method will typically indicate the value of 100 percent of the subject company

  C. The analyst may apply the fair market value standard to corporate assets even though the same standard of value is determined for the subject equity interest

  D. The analyst can apply the "axiomatic assets minus liabilities" to indicate the value of the subject business enterprise

  Correct Answer: A