CBV LEVEL 1 QUESTIONS SOLVED CORRECTLY LATEST 2025
Difference between capitalization and discount rate? - Answers Capitalization rate: rate of return used
to convert a point estimate of cash flow into value. Growth factor is deducted from discount rate -
capitalization rate.
Discount rate: the rate of return to convert a monetary sum, payable or receivable in the future into
present value.
CBV services are offered to? (5) - Answers Business Community
Legal
Government
Investment
Banking & insurance
Valuation Evaluation (historical reasons why we'd use a valuations) - Answers 1971 Tax reform - requires
gifts/ estate and capital gain taxes
OSC Policies - Non arms length transactions
Canada Business corporations act - minority Share holder rights
Matrimonial Law Legislation & Federal divorce act - privately held business interest
Accounting & Auditing standards - PPA for tangible assets then intangible asset valuations, impairment
testing
What are some other situations of where you'd have a valuation done? - Answers Income tax
transactions - FMV for capital gain measurements and ta planning
Estate planning - succession upon death
Share holders agreements & Disputes - buy and sell provisions
Minority Shareholders - dissent actions - might to withdraw
open market transactions defination - Answers Value determined based on Notional Valuation exposed
to open markets
Notional market transactions - Answers Value is determined theoretically (not exposed to the open
market)
, example, goals, and other facts of open market transaction - Answers example: actual acquisition &
Divestitures
Goals: Determination of price
Other: at the current date
Parties negotiate the value
Example, goals, and other facts of the Notional Market Transcation - Answers example: non arms length
transaction, equalization payments, determination of loss of business value
goal: Mirrors open market ( based on Rational Investors)
Other: at the current date or significant historical date
valuators determine the value (hindsight to consider evidence, not in value determination)
Fair Market Value is doing what with the notional market ad the open market? - Answers its when a
notional market is trying to reflect value on a open market
Fair Market Value - Answers - Highest price in terms of cash that the buyer is willing to pay to switch
hands
- at arms length in an open unrestricted market
- when neither is under compulsion to buy or sell
- when both parties have reasonable knowledge of relevant facts
Highest Price Obtainable defination - Answers Asset used in "highest and best use"
there is a "special interest purchaser" - when there are synergies that can be quantified
the failure to identify the SIP means you will determine the INTRINSIC value
cash equivalents - Answers safe and highly liquid assets that many firms list with their cash holdings on
their balance sheet
Arm's Length Transaction - Answers a transaction between two parties that have no relationship with
each other and who are negotiating on behalf of their own best interests. A fairly negotiated transaction
and reasonably representative of market value.
open market sale - Answers when no potential purchasers are able to be excluded
Price vs. Value differences are due to? - Answers - purchaser and seller has difference negotiating
abilities
- emotional considerations
Difference between capitalization and discount rate? - Answers Capitalization rate: rate of return used
to convert a point estimate of cash flow into value. Growth factor is deducted from discount rate -
capitalization rate.
Discount rate: the rate of return to convert a monetary sum, payable or receivable in the future into
present value.
CBV services are offered to? (5) - Answers Business Community
Legal
Government
Investment
Banking & insurance
Valuation Evaluation (historical reasons why we'd use a valuations) - Answers 1971 Tax reform - requires
gifts/ estate and capital gain taxes
OSC Policies - Non arms length transactions
Canada Business corporations act - minority Share holder rights
Matrimonial Law Legislation & Federal divorce act - privately held business interest
Accounting & Auditing standards - PPA for tangible assets then intangible asset valuations, impairment
testing
What are some other situations of where you'd have a valuation done? - Answers Income tax
transactions - FMV for capital gain measurements and ta planning
Estate planning - succession upon death
Share holders agreements & Disputes - buy and sell provisions
Minority Shareholders - dissent actions - might to withdraw
open market transactions defination - Answers Value determined based on Notional Valuation exposed
to open markets
Notional market transactions - Answers Value is determined theoretically (not exposed to the open
market)
, example, goals, and other facts of open market transaction - Answers example: actual acquisition &
Divestitures
Goals: Determination of price
Other: at the current date
Parties negotiate the value
Example, goals, and other facts of the Notional Market Transcation - Answers example: non arms length
transaction, equalization payments, determination of loss of business value
goal: Mirrors open market ( based on Rational Investors)
Other: at the current date or significant historical date
valuators determine the value (hindsight to consider evidence, not in value determination)
Fair Market Value is doing what with the notional market ad the open market? - Answers its when a
notional market is trying to reflect value on a open market
Fair Market Value - Answers - Highest price in terms of cash that the buyer is willing to pay to switch
hands
- at arms length in an open unrestricted market
- when neither is under compulsion to buy or sell
- when both parties have reasonable knowledge of relevant facts
Highest Price Obtainable defination - Answers Asset used in "highest and best use"
there is a "special interest purchaser" - when there are synergies that can be quantified
the failure to identify the SIP means you will determine the INTRINSIC value
cash equivalents - Answers safe and highly liquid assets that many firms list with their cash holdings on
their balance sheet
Arm's Length Transaction - Answers a transaction between two parties that have no relationship with
each other and who are negotiating on behalf of their own best interests. A fairly negotiated transaction
and reasonably representative of market value.
open market sale - Answers when no potential purchasers are able to be excluded
Price vs. Value differences are due to? - Answers - purchaser and seller has difference negotiating
abilities
- emotional considerations
