NACVA NACVA Certifications CVA Questions & Answers

• Question 51:

  The advantages of having a formal, independent outside appraisal, kept current with periodic updates are many. From a business planning perspective, the typical strong (management/ownership relationship) in a closely held business often requires a valuation study in order to support:

  A. Various ownership strategies

  B. Business directions and investments alternatives

  C. Professionally prepared approvals

  D. Acceptable valuation philosophy

  Correct Answer: AB

• Question 52:

  It is highly unlikely, in formula approaches for setting the price in a buy-sell agreement, that the price established by a formula at the time of signing will be even close to the value of the interest at the time of triggering event, which could be many years later. For these reason analysts:

  A. Highly encourage the use of formulas in high-sell agreements

  B. Highly discourage the use of formulas in high-sell agreements

  C. Allow flexibility in approach

  D. Do not allow flexibility in approach

  Correct Answer: B

• Question 53:

  Most of the mechanisms for setting prices in buy-sell agreements generally fall into one or a combination of following categories EXCEPT:

  A. Some type of formula based on the financial statements such as book value, some combination of such variables

  B. Negotiation among the parties

  C. Independent outside appraisal

  D. Ambiguity as to the applicable valuation date

  Correct Answer: D

• Question 54:

  One unique aspect of the valuation provision in a Bu-Sell agreement, as opposed to other valuation problems, is the extreme uncertainty concerning when a future event that triggers a transaction under the agreement will occur. This is one of the key reasons why:

  A. Is no single approach to the problem of establishing the price?

  B. Is no single method for a buy-sell agreement that one can recommend as completely satisfactory for all situations

  C. There is no negotiation among the parties

  D. Independent outside appraisal

  Correct Answer: AB

• Question 55:

  Buy-sell agreement may specify that the shares be valued strictly at their fair market value as:

  A. Controlling ownership interests

  B. At a proportionate share of the enterprise value with no discount of lack of control and/or no discount for lack of marketability

  C. At a specified percentage discount from a proportionate share of total enterprise value

  D. Both B and C

  Correct Answer: D

• Question 56:

  One consideration in the choice between the cross purchase versus redemption form of buy-sell agreement is:

  A. To find non-controlling owner

  B. The number of shareholders or partners involved

  C. The interest from transferring party

  D. Number of party-to-party relationship

  Correct Answer: B

• Question 57:

  "Tag along rights" are Buy-Sell agreements which:

  A. Often call for the sales of interest on the same terms if the controlling owner sells

  B. Have become more common these days

  C. Allow the issuer first priority to buy the interest and other stockholders or partners the second-place option to buy

  D. Both A and B

  Correct Answer: D

• Question 58:

  Buy-sell agreement in which issuing corporation or partnership buys the interest from the transferring party or from the deceased party is called:

  A. Repurchase agreement

  B. Entity purchase agreement

  C. Redemption agreement

  D. Cross purchase agreement

  Correct Answer: ABC

• Question 59:

  The instances and factors contributing to in adequate valuations for tax purposes by both taxpayer and IRS experts could easily fill an entire book of this size. Some of the most common inadequacies are the following EXCEPT:

  A. The valuation is out of date

  B. Lack of site visits and/or management interviews

  C. Inadequate selection and/or analysis/explanation of selected (e.g. pricing multiples, discount/ capitalization rates, discounts/premiums)

  D. Unsuccessful Daubert challenges

  Correct Answer: D

• Question 60:

  FLPs (Family limited partnership) may help an owner maintain:

  A. Control of assets

  B. May protects assets from creditors

  C. May avoid fractionalization of title

  D. All of these

  Correct Answer: D