Questions and Answers of Managers And The Legal Environment

What considerations should you bear in mind, as you look at various approaches to value enhancement?
Why can EVA serve as a foundation for an integrated fi nancial management system?
What is economic value added (EVA) and what are the different ways of calculating EVA?
What are the three key drivers of value creation? How is MVA related to the basic drivers?
Discuss the properties of MVA.
What adjustments to the book value of shareholder’s funds to get the adjusted shareholder’s funds?
What is market value added (MVA)?
Discuss the ways by which a fi rm can reduce its cost of capital.
What are the main entry barriers that give competitive edge to a fi rm?
Discuss the ways and means by which a fi rm can increase cash fl ows from existing investments.
What is value based management (VBM)?
What factors have stimulated greater interest in value creation?
Include a signed certifi cate stating compliance with USPAP Standards Rule 10-3.The thrust of this certifi cate is on the valuer declaring that the valuation is not biased or motivated.
Set forth any additional information that justifi es compliance with or permi ed departure from the USPAP “businesses appraisal development” standards.
Explain the rationale for the valuation methods and procedures followed.
Specify the information considered, the analytical procedures followed, and the reasoning underlying the valuation opinions and conclusions.
Spell out all assumptions and limiting conditions that have a bearing on the analyses, opinions, and conclusions
Describe the valuation process.
Mention the eff ective or lien date of valuation and the date of the valuation report.
Defi ne the standard of value that is being estimated.
State why valuation is being done and the client’s intended use of the valuation opinions and conclusions.
Describe the business or business ownership interest that is being valued.
Discuss the following methods for valuation of goodwill: average profi ts method, super profi ts method, and capitalisation method.
What is goodwill? How does it appear in the balance sheet of the fi rm?
Ordinarily, what should the valuation report contain, at a minimum?
Discuss the types of supplementary checks to be used for verifying valuation data.
What methods are commonly used for analysing risks in valuing intangible assets?
Identify the key information required for valuing intangible assets.
Explain the following methods for estimating the brand contribution: utility cost method, return on capital method, premium profi ts method, and retail premium method.
Discuss the following approaches for valuing intangible assets: cost approach, market approach, and economic approach.
Discuss the purposes and bases for valuing intangible assets. How would you match them?
Describe the following intangible assets: brands, intellectual property, publishing rights, licenses, and franchises.
What are the attributes of an intangible asset?
Discuss the importance of intangibles in today’s economy.
Discuss how miscategorisation of capital expenses in an intangible-intensive fi rm can be corrected.
How can fi nancial distress be handled in valuation?
What are the sources of complexity in fi nancial statements?
What are synergies? How are they valued?
What makes up transaction costs?
What is the value of control?
How do stock options affect the value of equity?
How should one value cash, cross holdings, and other non-operating assets.
Discuss the CCI Guidelines for determining the “Fari Value” of a company’s shares.
What considerations should be borne in mind while valuing an insurance company?
What considerations should be borne in mind while valuing a bank?
Discuss a two-scenario approach for valuing cyclical companies.
What procedure may be followed for valuing a high growth company?
Discuss the guidelines that are helpful in valuing companies in emerging markets.
What are the special considerations that should be borne in mind in cross-border valuation?
Discuss the unique issues that arise in the context of a multi-business company
Assess the use of option valuation.
What mistakes are made in real option valuation.
What are the merits of the binomial option model?
Discuss the adjustments made for dividend payment in the Black-Scholes model.
Describe the risk-neutral valuation method.
State the assumptions underlying the Black-Scholes model.
What is the value of a call option as per the Black-Scholes model?
Derive the value of call option in the binomial world using the option equivalent method.
Show why a higher variability of the stock price has a positive effect on the value of call option.
Discuss the key factors that have a bearing on the value of a call option.
Specify the boundaries within which the value of a call option falls.
Defi ne the payoffs of a call option and a put option from the point of view of the option writer (or seller).
What is the payoff of a European call option and put option?
Defi ne the following terms: option holder, option writer, exercise price, maturity date.
Describe the different types of options embedded in real projects.
What factors infl uence the value of fl exibility?
What is the difference between standard NPV and contingent NPV?
What are the limitations of the DCF model?
What are some of the popular myths surrounding valuation and the reality corresponding to them?
How would you adjust for control and non-marketability?
What is reverse fi nancial engineering?
Discuss the guidelines for corporate valuation.
How would you decompose the value of a fi rm in terms three tranches viz., asset value, franchise value, and growth value?
What is total value?
What is franchise value?
How is current earnings power value estimated under the ‘strategic approach to value’?
How is asset value assessed under the ‘strategic approach to valuation’?
What are the limitations of DCF approach?
Discuss the implications of effi cient market hypothesis for appraisal practice.
What is the empirical evidence in favour of and against market effi ciency?
What are the common misconceptions about the effi cient market hypothesis and how would you dispel them?
What is an effi cient market? Distinguish three levels of market effi ciency.
What is fair value accounting? What are the pros and cons of fair value accounting?
How are various assets valued to refl ect replacement cost?
Discuss the reasons for the potential divergence between book value and market value.
Why is relative valuation so popular? What are weakness of relative valuation?
What are the best practices with respect to multiples?
What ratios are commonly used for various situations or sectors?
Discuss the following enterprise valuation (EV) multiples: EV-FCFF multiple, EV-EBITDA multiple, EV-book value multiple, and EV-sales multiple.
Discuss the following equity valuation multiples: price-to-earnings multiple, price-to-book value multiple, and price-to-sales multiple.
Discuss the steps involved in relative valuation.
How is the value of equity calculated as per the maintainable profi ts model.
How is the value of equity calculated as per the residual earnings model.
Discuss the applicability and limitations of the DCF model.
What is economic profi t (EP)? How is the value of the fi rm defi ned under the EP model?
How is enterprise value defi ned under the APV approach?
How do you measure free cash fl ow to equity?
What are the advantages and disadvantages of the dividend discount model?
Discuss the following dividend discount models: zero growth model, constant growth model, two stage growth model, H model, and three stage growth model.
What are the problems with the enterprise DCF model?

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