Exam 14: Moving From Enterprise Value to Value Per Share

For equity stakes in subsidiaries where the stake is between 20 and 50 percent of the subsidiary,the holding is recorded on the balance sheet at:

Which of the following approaches are methods for evaluating convertible debt? I.Market value. II.Multiples value. III.Black-Scholes value. IV.Conversion value.

In evaluating employee stock options,the exercise value approach provides a lower bound of valuation,and using it can overvalue the firm.

In estimating value per share of common stock of a company,for which of the following is book value a reasonable approximation for evaluating the asset or liability? I.Excess real estate. II.Discontinued operations. III.Floating rate debt. IV.Employee stock options.

List three alternatives to discounted cash flow (DCF )analysis when estimating the value of a subsidiary of a parent company using only the parent company's financial information,and identify the conditions when each is recommended.

The multiples valuation of a subsidiary is most appropriate when the subsidiary is publicly traded and the parent owns less than 20 percent of the subsidiary.

Company X controls Company Y so that Company Y's financial statements are fully consolidated in the group accounts.With respect to Company X's financial statements,third-party stakes in Company Y:

Indicate in which cases book value is a reasonable approximation for evaluating the asset or liability.Answer "Yes" if book value is a reasonable approximation and "No" if it is not. A.Floating-rate debt. B.Outstanding bonds that are secure and actively traded. C.Discontinued operations. D.Stake in a publicly traded subsidiary. E.Excess real estate. F.Loans to nonconsolidated subsidiaries and other companies (assume interest rates and credit risk have not changed). G.An outstanding convertible bond deep in the money. H.Employee stock options.

In the estimation of value process,which of the following are true concerning discontinued operations? I.The earnings from discontinued operations are explicitly shown in the income statement. II.The net asset position of discontinued operations is disclosed on the balance sheet. III.For an outside analyst,the most recent book value usually serves as a good estimate of the value of discontinued operations. IV.The value of discontinued operations should be modeled as part of free cash flow or included in the DCF value of operations.

An analyst is applying an integrated-scenario approach to evaluate operations as well as equity,and the analyst essentially treats equity as a call option on the enterprise value.It is most likely the analysis is of a company that:

A corporation has 5 million shares outstanding.Using the following information,calculate the value per share. DCF of operations = $858m Financial subsidiary = $66m Employee stock options = $6.6m Bonds = $366.3m Securitized receivables = $3.3m Operating leases = $12.1m The value per share is closest to:

Which of the following is best categorized as a hybrid claim against a company as opposed to a debt equivalent?

Which of the following are true concerning nonoperating assets that can be converted into cash on short notice and at low cost? I.They are classified as excess cash and marketable securities. II.Short-term losses can be deducted directly from their value,bypassing the income statement. III.Under International Financial Reporting Standards (IFRS),they are to be reported at fair market value on the balance sheet. IV.Under U.S.Generally Accepted Accounting Principles (GAAP),they are to be reported at fair market value on the balance sheet.

A corporation has 5 million shares outstanding.Using the following information,calculate the value per share. DCF of operations = $780m Financial subsidiary = $60m Employee stock options = $6m Bonds = $333m Securitized receivables = $3m Operating leases = $11m The value per share is closest to:

Given the following list,put a "+" if it increases a firm's equity value or a "-" if it decreases the firm's value per share of common stock. Excess real estate Preferred stock Noncontrolling interest Tax loss carryforward Unfunded persion liabilities Nonconsolidated subsidiaries

In evaluating employee stock options,the exercise value approach provides:

Which of the following correctly lists the conditions when the multiples valuation of a subsidiary is appropriate?

For loans to nonconsolidated subsidiaries and other companies,an analyst can estimate the asset's value by using the reported book value if the loan was made using fair market terms and if the borrower's credit risk and general interest rates have not changed significantly since the loan was made.