Financial Valuation Workbook, 5th Edition

CHAPTER 2Valuation Case Study Exercises: Solutions and Explanations

EXERCISE 1 Which of the following is the as of date for valuation?

1. Any time within one year
2. As of a single point in time
3. As of a single point in time or six months later
4. Date that the report is signed

ANSWER: b. As of a single point in time

The valuation date is always as of a single point in time, typically a day. Valuation of a business is a dynamic, not static, exercise. Values can change constantly, such that a value today may be very different from the value a year from now or even just a few months from now. In the estate tax area, valuations are as of the date of death or six months later. However, this is only for estate tax. The date that the analyst signs the report usually does not coincide with the as of date. The signature date is most often after the valuation date.

EXERCISE 2 This is a detailed report per SSVS. What other types of reports are allowed under SSVS?

ANSWER:	a. Summary report
b. Calculation report
c. Oral report

EXERCISE 3 The purpose of the valuation of Nova is to assist management in internal operational and tax planning. What other purposes are there?

ANSWER: Valuations are used for a variety of purposes, including estate tax, income tax, gift tax, ESOPs (employee stock ownership plans), marital dissolution, buying companies, selling companies, shareholder oppression cases, dissenting rights cases, financial reporting, reorganization and bankruptcy, ...