Special Purpose Valuation Bashier Elhafy November 21, 2019 CVA, Special Purpose Valuation Comments Off on Special Purpose Valuation 31 Views Study MaterialsKnowledge Test Loading Viewer... Your email address: Your name: Start Quiz <<12345678910111213141516>> 0% Question 1 of 16 1. The primary method of valuing preferred stock in startups and middle market companies is:Analysis of comparable transactionsApplying a discount factor to the value of common sharesUsing the Black-Scholes modelUsing a discounting method Loading... Question 1 of 16Question 2 of 16 2. Intangible assets are valued using aggregate or individual methods. The individual valuation methods include:Residual valueAllocated value in arm’s length’s transactionsRelief from royalty methodQuantification of goodwill Loading... Question 2 of 16Question 3 of 16 3. Assume a company with a dual-class stock capitalization structure has a market value of equity of $63 million. Currently, there are one million voting shares and five million non-voting shares outstanding. Based on a public market analysis, the valuation analyst estimates that a reasonable premium for voting rights is 5%. As a result, a discount for lack of voting rights is calculated as: 4.76%5%2.71%1.54% Loading... Question 3 of 16Question 4 of 16 4. What two key characteristics of preferred stock make them attractive to investors in startups and middle market businesses?Preferred dividends and voting rightsLiquidation preference and anti-dilution protectionParticipation along with common shareholder on company profits and registration rightsPay-to-play and drag along rights Loading... Question 4 of 16Question 5 of 16 5. Convertible securities can be exchanged for common shares of the issuing company. This type of securities includesClass B stockPhantom stockFounders stockConvertible notes Loading... Question 5 of 16Question 6 of 16 6. Dual class voting stock structures (voting – non-voting) are used by companies because they:Allow the executive team to better compensate employees for achieving short-term objectivesIncrease the company’s valuationAllow the concentration of the degree of control associated with an ownership interestResult in higher dividends for the voting stock Loading... Question 6 of 16Question 7 of 16 7. Which of the following are key features of stock options?Strike price, volatility, yield to maturityVolatility, risk-free-rate, earnings per shareMaturity, dividend yield, equity risk premiumStrike price, volatility, time to expiration Loading... Question 7 of 16Question 8 of 16 8. The value of a debt security in a privately-held company is calculated by:The current book value recorded on the company’s balance sheetDetermining what the company can reasonably pay in the futureThe original debt commitment less payments to date (interest plus principal)Discounting the debt-related cash flows at a rate that takes into account the risk-free rate and the company’s risk of default. Loading... Question 8 of 16Question 9 of 16 9. Which of the following factors impact the lack of voting rights discount?The company’s effective tax rateCurrent market conditionsWeak managementForm of incorporation Loading... Question 9 of 16Question 10 of 16 10. Which of the following models are commonly used to value stock options?Black-Scholes, Binomial, Adjusted Present ValueDiscounted Cash Flow, Binomial, Quadratic ApproximationBlack-Scholes, Binomial, Quadratic ApproximationBlack-Scholes, Quadratic Approximation, Economic Value AddedBinomial, Black Scholes, Three-Stage DCF Loading... Question 10 of 16Question 11 of 16 11. Which regulatory guideline governs the valuation of preferred stock?IRS Revenue Ruling 59-60IRS Revenue Ruling 83-12ARM 34IRS Revenue Ruling 77-287 Loading... Question 11 of 16Question 12 of 16 12. What are the suggested methods to value convertible securities?Comparable transactionsStraight security plus an optionValue of conversionCapitalization of earnings Loading... Question 12 of 16Question 13 of 16 13. Which of the following factors indicate the presence of “enterprise” goodwill?More than one owner, especially non-employee ownersFew investments in tangible assetsNo pre-existing non-compete agreementsBusiness name is the same as the owner’s Loading... Question 13 of 16Question 14 of 16 14. Intangible assets are a key source of competitive advantage for a company. This asset category mainly includes: Non-operating assetsPatents, copyrights, customer lists, goodwill, and favorable contracts among othersOnly assets that enjoy special legal status and protectionIntangible assets found on the company’s balance sheet Loading... Question 14 of 16Question 15 of 16 15. Which of the following statements is true regarding the Black-Scholes model?It calculates the value of a put optionCan only be used to value marketable optionsThe basic model is for dividend-paying stocksIt requires five inputs: current stock’s price, option’s exercise price, the risk-free rate, the stock’s volatility and the option’s time to expiration Loading... Question 15 of 16Question 16 of 16 16. The appropriate discount rate to use in discounting the cash flows of a debt security with no call provisions in a privately-held company is:The yield to maturityThe coupon interest rateThe risk-free rateYield to worst Loading... Question 16 of 16 Loading... Share tweet
