10 free, exam-style Certified Valuation Analyst (CVA) practice questions with answers and explanations. No signup required. Work through them below, then take the full free CVA practice test to study every exam domain.
An analyst is valuing a controlling equity interest using the capitalized cash flow method. Next year's expected net cash flow to equity is $525,000 (the most recent year was $500,000, growing at a sustainable 5%). The equity discount rate is 20%. What is the indicated value of equity?
Correct answer: C - $3,500,000
Using the Capital Asset Pricing Model (CAPM), an analyst observes a risk-free rate of 4.5%, a beta of 1.3, and an equity risk premium of 6.0%. What is the indicated cost of equity?
Correct answer: B - 12.3%
A valuation is prepared for a dissenting shareholder who is exercising appraisal rights under a state statute after a corporate merger. Which standard of value would MOST likely govern the engagement?
Correct answer: A - Statutory fair value
An analyst develops a cost of equity using the build-up method with a risk-free rate of 4.0%, an equity risk premium of 6.0%, a size premium of 3.5%, an industry risk premium of 1.0%, and a company-specific risk premium of 2.0%. If long-term sustainable growth is 3.0%, what is the capitalization rate to be applied to the next period's benefit stream?
Correct answer: D - 13.5%
A company's capital structure is 75% equity and 25% debt at market value. The cost of equity is 20%, the pre-tax cost of debt is 8%, and the tax rate is 25%. What is the weighted average cost of capital (WACC)?
Correct answer: B - 16.50%
An analyst is valuing a 10% non-controlling interest in a closely held company on a fair market value basis. The majority owner pays herself a salary well above market rates. Regarding a normalization adjustment to restate the owner's compensation to market, the adjustment is generally:
Correct answer: C - Not appropriate, because a minority holder cannot compel a change in pay
Market evidence indicates an applicable control premium of 25%. Based on this premium, what is the corresponding implied discount for lack of control (minority discount)?
Correct answer: A - 20.0%
Under NACVA Professional Standards, an analyst is engaged to apply valuation approaches and methods that the analyst and client agree upon, without performing all the procedures needed for a conclusion of value. The result is expressed as a 'calculated value.' Which type of report results from this engagement?
Correct answer: D - Calculation report
In a divorce engagement, an analyst values a sole practitioner's dental practice. A portion of the practice's value derives from the dentist's personal reputation, individual skill, and patient relationships that would not transfer in a sale. This portion is BEST classified as:
Correct answer: B - Personal (professional) goodwill
An analyst is valuing a real estate holding company whose primary assets are several commercial buildings generating rental income, with minimal operating activity beyond property management. Which valuation approach is generally MOST appropriate as the primary method?
Correct answer: A - Asset approach using the adjusted net asset method
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