Valuation Methods_1

Value pertains to how much a particular object is worth to a particular set of eyes.

• True

• False

Methods to value for real estate can may be different on how to value an entire business.

• True

• False

Businesses treat capital as a scarce resource that they should compete to obtain and efficiently manage.

• True

• False

According to the CFA Institute, valuation is the estimation of an asset's value based on variables perceived to be related to future investment returns, on comparisons with similar assets, or, when relevant, on estimates of immediate liquidation proceeds.

• True

• False

Valuation includes the use of forecasts to come up with reasonable estimate of value of an entity's assets or its equity.

• True

• False

Valuation techniques may differ across different assets, but all follows similar fundamental principles that drives the core of these approaches.

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• False

As valuation mostly deals with projections about future events, analysts should hone their ability to balance and evaluate different assumptions used in each phase of the valuation exercise, assess validity of available empirical evidence and come up with rational choices that aligns with the ultimate objective of the valuation activity.

• True

• False

In the corporate setting, the fundamental equation of value is grounded on the principle that Alfred Marshall popularized a company creates value if and only if the cost of acquiring capital exceed the return on capital invested.

• True

• False

Answer explanation

Return > Cost

Intrinsic value refers to the value of any asset based on the assumption assuming there is a hypothetically complete understanding of its investment characteristics.

• True

• False

Going Concern firm value is determined under the going concern assumption. The going concern assumption believes that the entity will cease to do its business activities into the foreseeable future.

• True

• False

Answer explanation

*will continue