Valuation Case Study Exercises: Solutions and Explanations
EXERCISE 1: Which of the following is the as of date for valuation?
a. Anytime within one year
b. As of a single point in time
c. As of a single point in time or six months later
d. Date that the report is signed
ANSWER: b. As of a single point in time
The valuation date is always as of a single point in time, typically a day. Valuation of a business is a dynamic, not static, exercise. Values can change constantly, such that a value today may be very different from the value a year from now or even just a few months from now. In the estate tax area, valuations are as of the date of death or six months later. However, this is only for estate tax. The date that the analyst signs the report usually does not coincide with the as of date. The signature date is most often after the valuation date.
EXERCISE 2: This is a detailed report per SSVS No. 1. What other types of reports are allowed under SSVS No. 1?
1. Summary report
2. Calculation report
3. Oral report
EXERCISE 3: The purpose of the valuation of LEGGO is to assist management in internal planning. What other purposes are there?
ANSWER: Valuations are used for a variety of purposes, including estate tax, income tax, gift tax, ESOPs (employee stock ownership plans), marital dissolution, buying companies, selling companies, shareholder oppression cases, dissenting rights cases, financial reporting, reorganization and bankruptcy, minority stockholder ...