Prepare for a quiz.
Please bring out your
✅
calculator,
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one-fourth sheet of paper,
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and a scratch paper.
Asset-Based Valuation Method
1. One of the advantages of using asset-based
. methods in valuation is
A. Relies on the ability of the firm to generate revenues in the coming
years
B. Considers future cash flows that can be derived from the use of assets
C. Incorporates how the market perceives the value of the company
D. Enables stakeholders to validate firm value based on the value of
assets it currently own
Asset-Based Valuation Method
2. This is used by the insurance companies as basis to determine the appropriate
insurance premium to be charged to their clients.
A. Reproduction value
B. Liquidation value
C. Replacement value
D. Book value
Asset-Based Valuation Method
3. Statement 1: Replacement value is used for business ventures
that are using highly specialized equipment
. in their operations.
Statement 2: Reproduction value method is an estimate of cost
of reproducing, creating developing or manufacturing a similar asset.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
.
Asset-Based Valuation Method
4. Statement 1: Green field investments are already in the going concern state, as
most business are in the optimistic perspective that they will grow in the future
because of historical proof.
Statement 2: When determining replacement costs of assets, valuators tend to
consult with appraisers.
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
Asset-Based Valuation Method
5. Extreme Corporation showed the following balances in its financial
. records as of
December 31:
Current Assets Php930,000
Current Liabilities . 500,000
Non-current Assets 3,000,000
Non-current Liabilities 1,500,000
Outstanding ordinary shares, beginning 1,200,000
Outstanding ordinary shares, ending 1,500,000
Intense Corporation issued additional 300,000 ordinary shares on June 1 as part of its
financing plan. What is the book value per share of Extreme Corporation as of
December 31?
A. Php1.57 B. Php1.39 C. Php1.40 D. Php1.25
.
Asset-Based Valuation Method
6. The following information are related to Lemon Corporation:
Sales Php15,000,000
Asset Turnover 3×
Debt to Equity Ratio 1.5
Weighted Average Outstanding shares 250,000 shares
Asset turnover only considered asset balance as of December 31. How much
is the book value per share of Lemon Corporation based the on the foregoing
information?
A. Php75.00 B. Php30.00 C. Php6.00 D. Php8.00
Asset-Based Valuation Method
.
7. Herb Corporation reported 500,000 ordinary shares at the beginning of 2022. In
the beginning of the second quarter, convertible bondholders opted to exercise
their option to convert to shares, resulting to additional 100,000 shares. In
October 1, Herb Corporation bought back 50,000 shares as they have spare cash.
What is the weighted average outstanding shares for 2022?
A. 452,500 B. 562,500 C. 550,000 D. 450,000
.
Asset-Based Valuation Method
8. As of December 31, 2022, Choco Corporation reported the following items in its balance sheet:
Cash Php240,000
Receivables 520,000
Inventory 350,000
Property and plant 3,000,000
Equipment 850,000
Accounts payable 400,000
Short-term notes payable 500,000
Long-term debt 1,000,000
Weighted average of outstanding shares in 2022 250,000
Choco Corporation contracted with a third-party appraiser to determine how much is the replacement cost
of its assets. Based on the report of the appraiser, the property and plant has replacement of 125% of its
reported value. On the other hand, the equipment only commands replacement cost of 70% of its value.
According to the appraiser, the equipment was designed using an old technology, thus, the lower
replacement cost. Other assets and liabilities are valued fairly. How much is the book value per share of
Choco Corporation as December 31, 2022?
A. Php19.84 B. Php16.24 C. Php15.84 D. Php12.24
Asset-Based Valuation Method
9. Sugar Company showed the following balances in its balance sheet as at year-end:
Current Assets Php450,000
Current Liabilities 300,000
Non-current Assets 1,150,000
Non-current Liabilities 900,000
Weighted average of outstanding shares 120,000 shares
According to the appraisal, 60% of the non-current assets can be replaced at 150% of their reported book
value while the remaining balance of the non-current assets has replacement value of 65%. Reported balance
of other items approximates their replacement value. How much is the replacement value of Sugar Company
at year- end?
A. Php584,000 B. Php400,000 C. Php1,784,000 D. Php1,600,000
.
Asset-Based Valuation Method
10. Eyyyy Company, a start-up company which developed its own data imaging algorithm, is trying to
estimate the value of their company. Their latest financial statements showed the following information:
Current Assets Php1,250,000
Non-current Assets 4,000,000
Current Liabilities 850,000
Non-current Liabilities 250,000
Part of their non-current assets is a patent for the technology they developed which has a recorded balance
of P2,500,000. An equity investor is looking at buying the company. Eyyyy Company tried to trace back the
costs of developing a patent and determined that the reproduction cost of that particular patent is at
P3,000,000. What is the reproduction value of Eyyy Company?
A. Php5,000,000 B. Php4,650,000 C. Php4,150,000 D. Php4,000,000
Asset-Based Valuation Method
Answers:
1. D
2. C
3. B
4. B
5. C
6. D
7. B
8. D
9. A
10. B
Asset-Based Valuation Method
Solutions for numbers 5-10:
Asset-Based Valuation Method
Asset-Based Valuation Method
Asset-Based Valuation Method
Asset-Based Valuation Method
Asset-Based Valuation Method
Asset-Based Valuation Method
