Certified Valuation Analyst (CVA) (CVA) Free Practice Test

Question 1

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

A. May protects assts from creditors

B. All of these

C. Control of assets

D. May avoid fractionalization of title

Correct Answer: B

Question 2

If the language of the relevant agreements indicates that minority block of stock will be valued on a controlling ownership interest level of value, a full lack of control discount will not apply to the transactions to which the provision is applicable. For example:

A. Some of the benefits of ownership control are lost due to public disclosure

B. The agreement may say that the subject shares will be valued "on an enterprise basis" or as "a per share portion of the over all company value."

C. A lack of control discount must be applicable to over all business value

D. Lack of control discount may not be inflated due to influences of ownership control

Correct Answer: A

Question 3

The fundamental of CAPM is:

A. That the risk discount portion of the expected return on a security is a function of that security's systematic risk.

B. That the risk discount portion of the expected return on a security is a function of that security's unsystematic risk.

C. That the risk premium portion of the expected return on a security is a function of that security's systematic risk.

D. That the risk premium portion of the expected return on a security is a function of that security's unsystematic risk.

Correct Answer: C

Question 4

Stockholders' privilege to subscribe to new issues of voting stock, usually the common stock or securities convertible into voting stock, usually the common stock or securities convertible into voting stock, before such offerings are made to non stockholders. This is called:

A. Non-disclosure status

B. A privileged subscription right

C. A preemptive right

D. Pre-offering status

Correct Answer: B,C

Question 5

The first step in the valuation process, after carefully defining the assignment, is to gather the data necessary to conduct the assignment. These data can be categorized into three groups. Which one of the following is NOT out of those groups?

A. Company-specific data

B. Data about the subject property's market (market of ownership interests in the subject company)

C. Data regarding whole supply chain

D. Data about the company's industry and economic environment

Correct Answer: C

Question 6

When it comes to related party transactions, it is important that the analyst gather:

A. As much information as is available in order to determine the nature of the transactions and their propriety

B. The list prepared that describes the terms of the transactions

C. Information regarding loans to and from related parties, leases, or purchases

D. Related part transactions information

Correct Answer: A

Question 7

When asking for historical financial statements on the subject property,
one should endeavor to study statements during a . The most commonly used period is five years, but this should not be used as a rote number of years.

A. Audited period

B. Relevant period

C. Compiled Period

D. Current period

Correct Answer: B

Question 8

Fair market value is defined as the price at which the property would change hands between a willing buyer and a willing seller when:

A. Parallel regulation is there

B. Neither is under any compulsion to buy, or to sell, both parties having reasonable knowledge of the facts

C. Courts have final jurisdiction over tax matters

D. Parties have sufficient knowledge base

Correct Answer: B

Question 9

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 interest from transferring party

C. Number of party-to-party relationship

D. The number of shareholders o partners involved

Correct Answer: D

Question 10

The analyst should keep in mind that (1) if earning are adjusted from LIFO to FIFO and
(2)
if after-tax income or after-tax cash flow are used as the appropriate measure of economic income, then the adjustment should be net of:

A. Net difference between the inventory and income tax liability adjustments

B. GDP rate (either additional taxes or benefit) associated with it

C. Net difference between the Earnings and income tax liability adjustments

D. Income tax effect (either additional taxes or benefit) associated with it

Correct Answer: D

Question 11

Valuation reports should contain a set of limiting conditions, and one of the typical limiting conditions is as follows:

A. Legal and estate tax factors

B. The valuation is valid only for the valuation date or dates specified herein. No other purpose is intended or should be inferred

C. The purpose of the valuation encompasses the use to which the valuation exercise is expected to be put

D. Litigation over business valuation is commonplace

Correct Answer: B

Question 12

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 corporations at a changing price contingent upon a certain event.

B. 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.

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: A

Question 13

The second step in capitalized excess earnings method is:

A. Capitalizing the excess economic earnings

B. Quantifying the amount of excess earnings

C. Estimation of normalized level of earnings

D. Estimating an appropriate direct capitalization

Correct Answer: C

Question 14

The Black-Scholes model assumes near perfect markets for both the options and the underlying stock. Among other conditions, the model assumes the following EXCEPT:

A. There are no commissions or other transaction costs in buying or selling the stock or the option

B. The stock price does not follow a random walk with a long normal distribution

C. Trading never stops. It is continuous through time following a geometric Brownian motion

D. The short-term risk-free rate is known and is constant through time

Correct Answer: B

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NACVA Certified Valuation Analyst (CVA) (CVA) Free Practice Test