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NACVA CVA EXAM QUESTIONS WITH 100% SOLVED!!
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NACVA CVA EXAM QUESTIONS WITH 100% SOLVED!!
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NACVA CVAEXAM
QUESTIONS
WITH 100%
SOLVED!!
Evatee 8/21/24 NAVCA CVA
,NACVA CVA EXAM QUESTIONS WITH 100%
SOLVED!!
HEBEDIPP Answer - History & Nature, Economy & Industry, Book Value,
Earnings Capacity, Dividend Paying Capacity, Intangibles, Prior Sales, Price in
the market
5/10/10 rule Answer - Eliminate data older than 5 years, eliminate data 10x
larger or smaller revenues, eliminate data 10x larger or smaller earnings or
EBITDA
The Internal Revenue Service has substantially contributed to valuation theory
and is regarded by many as a primary theoretician in the field of valuation of
closely held businesses. Revenue Rulings do not have the force of law, but they
do present the position of the IRS
on: Answer - specific tax matters, such as the valuation of businesses or equity
interests.
ARM 34 (IRS) Answer - (1) Issued in 1920
(2) Resulted from the enactment of Prohibition
(3) Issued as the result of the enactment of Prohibition, to assist taxpayers in
determining the amount of "intangible value" lost by businesses previously
involved in the alcoholic beverage industry
ARM 34 introduced two key concepts: Answer - (1) Goodwill exists if a business
has excess earnings
(2) Goodwill value is determined by capitalizing the excess earnings
,ARM 34 also introduced two key problems: Answer - (1) What are excess
earnings?
ARM 34 says that "excess earnings" are the earnings of the company in excess
of earnings above the norm of companies with similar activities and size.
(2) What is an appropriate capitalization rate?
ARM 34 failed to define an appropriate capitalization rate. However, it gave
approximate ranges for tangible and intangible assets.
RR 59-60 (IRS) Answer - Valuing Closely held Stock
(1) Issued in 1959
(2) Single most important piece of valuation literature
(3) Outlined methods and factors to be used in valuing closely held businesses
(4) Estate and Gift Taxes
(5) Is widely accepted for tax and non-tax purposes
(6) Provided for a series of valuation formulas or methods: (a) The various
formulas are not alternatives to one another; all of its methods should at least
be considered, (b) Many formulas are tied to "earnings" rather than "excess
earnings", (c) Earnings are multiplied or capitalized by certain industry factors
or "public"
company comparable factors
(7) Realized that due to certain circumstances other methods could be used
(8) Recognized that if "comparable" factors are not available, other methods
could be used
(9) The key 59-60 methods are: (a) Comparable price methods (just a few of
the many), i) Price/earnings ratio, ii) Dividend paying capacity, iii) Pric
RR 65-193 (IRS) Answer - (1) Modified Revenue Ruling 59-60
(2) Deleted a portion of Section 4.02(f) of Revenue Ruling 59-60
, (3) Concerned with separately valuing tangible and intangible property: "In
some instances it may not be possible to make a separate appraisal of the
tangible and intangible assets of the business. The enterprise
has a value as an entity. Whatever intangible value there is, which is supported
by the facts, may be measured by the amount by which the appraised value of
the tangible assets exceeds the net book value of such assets."
RR 66-49 (IRS) Answer - (1) Issued January 1, 1966
(2) Provided information and guidelines relative to appraisals of contributed
property for federal income tax purposes
(3) Required properly prepared appraisals by qualified individuals
(4) Provided guidelines regarding proper appraisal reports
RR 68-609 (IRS) Answer - Sometimes referred to as the "excess earnings
method" or "treasury method", this Ruling introduced a "formula" method to
determine values for intangibles, specifically goodwill. Required that adjusted
net assets be considered in deriving the total value of a business and discussed
the possible use of the following ranges of capitalization rates (generally
assumed to be after-tax):
(1) Tangible Assets 8% to 10%
(2) Intangible Assets 15% to 20%
RR 77-287 (IRS) Answer - (1) Issued in 1977
(2) Amplified Revenue Ruling 59-60 relative to discounts for lack of
marketability
(3) Specifically recognized criteria for determining discounts for lack of
marketability
(4) Provided direction on discounts for publicly traded securities restricted
under federal securities laws
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