Valuation Concepts and Methodologies INCOME BASED VALUATION

1. A valuation approach that is based on the concept that the actual value of a business lies in the ability to produce revenue, profit and eventually wealth in the future.

a. Income Based Valuation Approach

b Market Based Valuation Approach

c. Asset Based Valuation Approach

d. Liquidation Valuation Approach

2. The following methods are NOT income-based valuation technique except

a. Economic Value Added, Capitalizing current earnings and discounted future earnings

b. Economic Value Added Capitalization of earnings method and discounted cashflow method

c. Economic Value Added, Capitalizing past earnings and discounted cashflow approach

d Economic Value Added, Discounted Cashflow and Revenue Approach

3. Valuation approach that determines the equity value by calculating the present value of the expected future net cash flows or profits

a. Revenue Approach

b. Discounted Cashflows Method Approach

c. Capitalization of Earnings Approach

d. Economic Value Added

4. A valuation method used to estimate a firm's worth based on earnings forecasts. It uses these forecasts for the earnings of a firm and the firm's estimated terminal value at a future date, and discounts these back to the present using an appropriate discount rate

a. Revenue Approach

b. Discounted Cashflows Analysis

c. Capitalization of Earnings Approach

d. Economic value Added

5. The following are ways on to estimate terminal value except

a. Liquidation Value Model

b. Multiples Approach

c. Stable Growth Approach

d. Going Concern Model

6. In Income based valuation, investors consider two opposing theories

a. dividend relevance theory and bird-in-hand theory

b. bird-in-hand theory

c. dividend irrelevance theory

d. both b and c

7. The theory was introduced by Modigliani and Miller that supports the belief that the stock prices are not affected by dividends or the returns on the stock but more on the ability and sustainability of the asset or company.

a dividend relevance theory

b. bird-in-hand theory

c. dividend irrelevance theory

d. both b and c

8. The theory believes that dividend or capital gains has an impact on the price of the stock.

a. dividend relevance theory

b. bird-on-hand theory

c. dividend irrelevance theory

d. both a and b

9. The is also known as Income based valuation approach

a. earnings approach

b. market approach

c. asset-based approach

d. going concern approach

10. In sensitivity analysis, this factor is the additional value inputted in the calculation that would account for the increase in value of the firm due to other quantifiable attributes like potential growth, increase in prices, and even operating efficiencies.

a. earning accretion

b. earning dilution

c. earning increments

d. earning decrements

11. In sensitivity analysis, this factor will reduce value if there future circumstances that will affect the firm negatively.

a. earning accretion

b. earning dilution

c. earning increments

d. earning decrements

12. This is the amount that is added to the value of the firm in order to gain control of it.

a. equity accretion

b. earnings premium

c. equity control premium

d. additional paid in capital

13. These are the factors that can be considered to properly value the asset using income based valuation approach, except

a. earning accretion or dilution

b. equity accretion or dilution

c. equity control premium

d. precedent transaction

14. Using the income based valuation, these are previous deals or experiences that can be similar with the investment being evaluated.

a. earning accretion or dilution

b. equity accretion or dilution

c. equity control premium

d. precedent transaction

15. These transactions are considered risks that may affect further the ability to realize the projected earnings.

a. earning accretion or dilution

b. equity accretion or dilution

c. equity control premium.

d. precedent transaction