BEC Unit 2 Module 7

Question 1

Future payments must be discounted in a bond

valuation

Answer 1

Time Value of Money

Question 2

Net Realizable Value

Answer 2

Company recognizes price at which the inventory could be sold to market participants less any costs associated with shipping the inventory

Question 3

Market (Median Value Approach)

Answer 3

Removing outliers and taking average

Question 4

Cost Approach

Answer 4

Limited intangible assets exist and there are no reliable estimates of income, cash flows… the cost approach should be used

Question 5

Coupon Rate < Market Rate

Answer 5

Discount

Question 6

Black-Scholes Model

Answer 6

Stock prices behave randomly, no taxes or transaction costs, no dividends, options are EUROPEAN-style

Question 7

Valuing Intangible Assets

Answer 7

Just ask MIC

• Market - actual arms length transaction
• Income - Future cash flows are discounted to present value using discount rate
• Cost

Question 8

Preparing Accounting Estimates

Answer 8

• -Historical Information
• -Market information (Current value)
• -Expected usage (Depr.)
• -Estimates from experts (attorneys)