NACVA Exam Questions Instant Access - No Installation Required

Question 1

Imagine that an investor in the common stock of a company has two choices, either to (1) but 100 shares of a company's common stock at $10 per share or (2) to purchase a call for $125 to purchase 100 shares at the same $10 price at the end of nine months. If the investor chooses to buy the stock, the investor must pay $1,000 immediately and is at risk for the entire $1,000 investment. If the investor chooses to purchase the call option, the investor will pay only $125 immediately and can wait until the option's expiration date to decide whether or not to buy the stock for an additional $1,000. The investor's risk is limited to $125. If the option is ____________________, the option will be exercised. If it is ____________________, the option will simply lapse.

AIn-the-money, Out-of-the-money

BAt-the-money, Out-of-the-money

CAt-the-money, In-of-the-money

DAt-the-money, At-of-the-money

Answer : A

Question 2

''Market value is the most probable price which a property should bring in a completive and open market under all conditions requisite to fair sale the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.'' Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions/s whereby:

ABuyer and seller are typically motivated

BBoth parties are well informed or well advised and acting in what they consider their best interests

CA reasonable time is allowed for exposure in the open market

DDifferences in financing costs and tax status

Answer : A, B, C

Question 3

Depletion is relatively easy to define; it is very difficult to measure. Because of:

APercentage depletion

BUnrelated depletion methods

CReasonable estimates can be subject to wide variations

DNone of these

Answer : C

Question 4

The obvious disadvantage of the formal appraisal with regular update is:

ACost

BWastage of time

CComplexity of procedures

DDetailed reports having unnecessary information

Answer : A

Question 5

Statutory law

Case law

Administrative rulings

Company documents

Contracts between parties precedent established by prior transactions Legal documents. These are some of the most important sources of guidance as to:

AThe applicable standard and premises of value for the given situation.

BThe appraiser's experience and judgment.

CThe selection of appropriate premise

DThe value of the same business enterprise

Answer : A

Question 6

The primary ownership interest characteristics that need to be addressed in almost every business valuation are the following EXCEPT:

AControl or minority valuation basis (not necessarily a black-and--white issue ____there may be elements of control without absolute control

BDegree of marketability

CFair market value

DFair market value on a nonmarketable, non-controlling ownership interest basis.

Answer : C, D

Question 7

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:

ALess the potential income taxes payable on the sale of this stock

BLess the potential income taxes payable to hedge the stock

CPlus the potential income taxes payable on the sale of this stock

DLess the potential income taxes payable on short selling

Answer : A

NACVA Certified Valuation Analysts CVA Exam Questions