University:
CFA Institute
Course:
CFA Level 2 - Equity
Academic year:

2023
Views:

28

Pages:

3
Author:

anon

CFA Level 2 - Equity Session 12-Reading 46 Private Company Valuation-LOS b (Practice Questions, Sample Questions) 1. Assume that a property has a gross annual income equal to $150,000, and that comparable properties have a gross income multiplier equal to 11.25. The gross income multiplier approach provides a market value for this property that is closest to: A) $1,687,500. B) $1,625,000. C) $1,333,333 : (A) Gross income multiplier technique: MV = gross income × income multiplier. MV = $150,000 × 11.25 = $1,687,500 2. Assume that a property that you are evaluating has a gross annual income equal to $230,000, and that comparable properties are selling for 10.5 times gross income. The gross income multiplier approach provides a market value for this property that is closest to: A) $2,587,500. B) $2,415,000. C) $2,190,476 : (B) Gross income multiplier technique: MV = gross income × income multiplier. MV = $230,000 × 10.5 = $2,415,000 3. Which of the following is least likely an example of a transaction-related valuation for a private company? A) Bankruptcy proceeding. B) Performance-based managerial compensation. C) Financial reporting : (C) Venture capital financing, initial public offering (IPO), bankruptcy proceeding, performance-based managerial compensation, and sale in an acquisition are all examples of transaction-related valuations for a private company 4. Which of the following is least likely an example of a compliance-related valuation for a private company? A) Financial reporting. B) Bankruptcy proceeding. C) Tax purposes : (B) A bankruptcy proceeding is an example of a transaction-related valuation for a private company 5. Which of the following is least likely an example of a litigation-related valuation for a private company? A) Bankruptcy proceeding. B) Lost profits claims. C) Divorce settlements : (A) Litigation-related valuations may be required for shareholder suits, damage claims, lost profits claims, or divorce settlements. A bankruptcy proceeding is an example of a transaction-related valuation for a private company