Reference no: EM133004859

VALUATION METHOD

True or False

Problem 1. Value, in the point of view of corporate shareholders, relates to the difference between cash inflows generated by an investment and the cost associated with the capital invested which captures both time value of money and risk premium.

True

False

Problem 2. 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 return on capital invested does not exceed the cost of acquiring capital

True

False

Problem 3. Acquisition is the general term which describes the transaction two companies have their assets combined to form a wholly new entity.

True

False

Problem 4. Information Traders are Traders that react based on new information about firms that are revealed to the stock market. The underlying belief is that information traders are more adept in guessing or getting new information about firms and they can make predict how the market will react based on this.

True

False

Problem 5. Value pertains to how much a particular object is worth to a particular set of eyes.

True

False

Problem 6. According to the NCFB 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

Problem 7. 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

Problem 8. A merger usually has two parties: the buying firm and the selling firm. The buying firm needs to determine the fair value of the target company prior to offering a bid price.

True

False