'S AND METHODOLOGIES EXERCISES True or False. Write TRUE if the Statement is true and the word FALSE you find the statement inconsistent with the truth. f— Ee STATEMENT Asset has been defined by the industry as transactions TUG at would yield future economic benefits as a result of past transactions. wet 2._Brown field investment is the term used to describe businesses that are starting from scratch. PAUSE Beso Risk Management allows the company =< to increase performance variably ; identification is important to allow investors to twee ca impact of the risk to their investment. we ‘own field investments are easier to evaluate as information is already available from prior years [Ook value is the term used to describe the value True derived from the amounts reflected in the financial statements. 7._ Borrowings that are contracted to be paid after 24 tse | -inonths is classified as current ibiltes. Tee juipment is classified as non-current assets. Jp set book value per share, oa ables is deducted Rs fom total assets and the resulting figure is divided by total authorized shares. 70. Book value method is a transparent approach since THE | value can be easily verified by looking at the financial statements. feuw Le Beplacement cost is the Cost of similar assets that have the nearest equivalent value as of the valuation date. Tue 12, Replacement value is affected by asset age, size and its Competitive advantage. 73, Jnsirance companies use replacement value as basis to wae determine the appropriate insurance premium to be charged to their clients. pue pe real properties, it is more important to look at the age of the asset than its size. 75Replacement value method is superior to book value as Teug, it gives an indication of true value of the firm as of the valuation date. placement value is an estimate of cost of fase reproducing, creating, developing or manufacturing ‘similar asset - ee if there is no comparable assets found in the market, itis more appropriate to use reproduction value method.VEU Nile ele) el bY au AREER Bae 18. roduction value is used for business vel tures that TUE, are using highly specialized equipment in their operations. - NE 79. Reproduction value is easy to validate despite not i aving comparable assets in the ines nod gives 20. Ameng the approaches, the book v me 2 the most recent approximate of the company value.VALUATION CONCEPTS AND METHODO! MULTIPLE CHOICE THEORY. Write the letter of the best answer before the number of the question or statement being answered, 1 fis has been defined by the industry as transactions that would yield future economic benefits as a result of past transactions. a. b. c. d, Asset Equity Net Assets Shares of Stocks — B 2. These are investments which are already in the going concem state, as jost business are in the optimistic perspective that they will grow in the future because of historical proof a b. c. d. Green Field Investments . Brown Field Investments Blue Field Investment |. Black Field Investments A 3. the following describes the benefits of having a sound Enterprise-wide Risk Management system except a. b, c. d. Facilitates elimination of all business risks .. Manage performance variability Enhance business resilience against changes Improve distribution of resource across the firm D 4. Qe of the advantages of using asset-based methods in valuation is a. Relies on the ability of the firm to generate revenues in the b. coming years Considers future cash flows that can be derived from the use of assets Incorporates how the market perceives the value of the company . Enables stakeholders to validate firm value based on the value of assets it currently own B 5. Ths refers to the value recorded in the accounting books of a firm as eflected in the audited financial statements. a b, c. d. Exit value . Book value Earnings per share Fair market value( 4 Receivables that are collectible after 60 days are classified as a. Current Liabilities 7 b. Non-current Liabilities ! c. Current Assets d. Non-current Assets & The net book value of assets may also represents a. Total shareholder's equity b. Total assets c. Total liabilities d. Total long-term debt _9( Book value also reflects the company’s a. Historical value b. Liquidation value c._ Intrinsic value d. Fair market value Loses the book value has its advantages, the following statements provide them except ‘a. Information necessary for computation can be quickly gathered Validated by a third-party expert with knowledge on how much assets are sold in the open market ‘Shows a transparent view on firm value Can easily be validated by reviewing the company's audited financial statements 8 sorbon of similar assets that have the nearest equivalent value as of the valuation date. a. Book value b. Replacement cost c. Fair market value d. Reproduction value b. c. d, C 41The factor that affects the replacement value of an asset are the following except a. Competitive advantage of the asset b. Size of the asset c. Original acquisition cost of the asset d Asset ageVALUATION CONCEPTS AND METHODOLOGIES B 12. The main basis to determine the value of the insurance premium to be __ pai cover the risk for an asset is a. Original acquisition cost b. Replacement cost ¢. Book value as of premium payment date d Acquisition cost less accumulated depreciation and impairment losses \ © 13, Wien determining replacement costs of assets, valuators tend to consult with a. Actuaries b. Board of Directors c. Appraisers d. Equity Analysts 14. Book value and replacement values of an asset are theoretically difféfent. The difference of these two is a. Book value is based on the historical acquisition costs while replacement value is based on the net asset value as of balance sheet date. b. Book value can be computed from the financial statements while replacement value is gathered by employing services of an appraiser. ¢. Book value is computed on a per share basis, but replacement cost is shown as absolute values. d. Book value includes cost allowances for gaps against market prices while replacement cost does not. ¢ 15. What method is appropriate in valuing assets which do not have available external information even after consulting with appraisers? _-—_ 2 Book value method b. Replacement value method c. Reproduction value method d. Liquidation value method )) 16. The use of reproduction value method is appropriate for the following exept S ee When calculating value of new technology or start-up businesses b. Ventures with highly specialized equipment c. Companies that are highly reliant with intangible assets d. Businesses that use equipment supplied by third-party manufacturerA 47. Bepfoduction value is the a. Estimate of cost of reproducing, creating, developing or manufacturing a similar asset internally b. Salvage value of the asset c. Net value reflected in the company’s d. Cost of similar assets that have the nearest as of the valuation date financial statements t equivalent value the use of reproduction value method? ¢ What is the limitation imposed by 1 inal cost of the assets at the time a. It considers only the orig they are acquired b. High professional fees of appraisers c._ Difficulty in validating reasonableness because of limited comparators d. Inability to forecast future cash fl uncertainties in the market of calculated value lows accurately because of 8 (19. The following methods shows the most recent value of the firm assets in the market as of the valuation date, except a. Replacement value method b. Liquidation value method ¢. Reproduction value method d. Book value method deducted the asset value? a. Total liabilities b. Total shareholders equity c. Long-term debt only d, Ordinary share capital Pie computing for book value, which of the following items should beVALUATION CONCEP MULTIPLE CHOICE PROBLEM. write the letter of the best answer before the number of the question or statement being answered p14 lowing data were gathered from the annual report of Thom roducts: Market price per share Php 30.00 Number of ordinary shares 10,000/ Preferred stock, 5%, P100 par Php 10,000 Ordinary equity Php120,0 The book value per share is (20 000 a. Php30.00 fo 000 b. Php15.00 za c. Php14.00 = d. Php12.00 BT following information was reported by Adele Company in their financial statements: Current Assets . Php250,000 Non-current Assets 760,000 Current Liabilities - 60,000 Non-current Liabilities 350,000 How much is the book value of Adele Company? a.Php190,000 WTAL RGSeTS TOTAL UBILITIRS b. Php600,000 250 00 & 000 c. Php660,000 Yeo 000 350 000 To = 0 = d. Php1,010,000 1 Oto 000 ho 000. 400 00d 8 3/Sam, an analyst, is looking at the 2019 financial statements of Smith Company and gathered the following details: ai Php310,000 Receivables on ond Inventory ania Property, Plant and Equipment 475,000 Accounts Payable 500,000 Long-term Notes Payable Ordinary Share Capital (250,000 eae Outstanding shares, P1.25 par) 532,500 Retained Earnings ‘ION CONCEPTS AND METHODOLOGIES There are no other issuances or buyback of shares in 2019. How much is the book value per share of Smith Company? a. Php6.08 “TIM. Assets. - TOTAL UasiuiTies b, Php3.38 310 000 [AS 600 S400 gag c.Php2.13 3% 000 —&H COD Zo = d. Php1.25 ea as TEED, = “EAS baw = BAS 000 ~ —EqgEGe 2 84S 000, YX Incorporated showSe the Pllawingsbalances in its financial A422 "_sletements for 2019: Current Assets Php 510,000 Non-current Assets 1,065,000 Current Liabilities 355,000 Non-current Liabilities 1,000,000 500,000 Outstanding ordinary shares What is the book value per share of ZYX incorporated? a. Php0.44 TOI ASSETS -TOTAL UpBILitiL< 320000 oy b. Php1.15 ClO 000 genre “00 00d 0D” —4 c.Php3.15 105600 1000 d.Php5.86 - 'S#6 P00 - 13SSD0D = 320000 ‘Accounting records of Arabica Company showed the following items as of December 31: Current asset: Php 950,000 Current liabilities 600,000 Noncurrent assets 3,500,000 Noncurrent liabilities 2,000,000 Ordinary shares outstanding, January 1 400,000 Ordinary shares outstanding, December 31 500,000 In July 1, Arabica Company issued additional 100,000 ordinary shares to fund its investment plan. How much is the book value of Arabica Company as of December 31? a. Php4,450,000 TOTRL SseTs OTL URBILATIRG b. Php3,850,000 450 060 ep C00 c. Php2,450,000 _3S00. 000 2000 000 d. Php1,850,000 — Pp A450 MD - 3059 OOD = P 1880000 =—VALUATION CONCEPTS 6. Intense Corporation showed the following balances in its financial records as of December 31: ‘urrent Assets Php 880,000 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 Intense Corporation as of December 317 1209 000 x § + (000000 a. Php1.57 Tow Assets TOL URQIUTIES 000 ¥ 7 > {0609 000 b.Php1.39 _%¢0 00D 500 600 ed Ves09 006 =p c.Php1.37 3000900 _{s00 coo 1e8 000 = 1338000 d.Php1.25 3880000 - 2000 60> VerS000 * 13t + 1880 600 = D_ 7. Thetollowing information are related to Citrus Corporation: les Php 15,000,000 ‘Asset Turnover 3.0x Debt to Equity Ratio 15 Weighted average outstanding shares 200,000 shares Asset tumover only considered asset balance as of December 31 How much is the book value per share of Citrus Corporation based on the foregoing information? ages Twnover —pebt to Tully Rabid @.Php75.00 3, Js 000000 4.¢, _3 0m O00 b. Php25.00 x 2 O0b C.Php15.00 8x _ [$00000 ay, Value d.Php10.00 “S 3 © © 000 Oy 9000 om / 200 000 * S000 0% so to// b ‘orporation reported 500,000 ordinary shares at the ig of 2020. In the beginning of the second quarter, convertible holders opted to exercise their option to convert to shares, Sulting to additional 100,000 shares. In October 1, Spice Corporation bought back 50,000 shares as they have spare cash. What is the weighted average outstanding shares for 2020? a. 600,000 shares fro oo « 37 106 00 b. 562,500 shares gypQ0b x L* Slop O% c. 550,000 shares d. 500,000 shares SSD OOD * 3 =_ (6 F000b bas0 000 fie: {2 soo9. Hercules Company reported the following balances as of December 31, 2019: Current assets Php 750,000 Non-current assets 1,400,000 Current liabilitie 400,000 500,000 Non-current liat Outstanding ordinary shares 1,000,000 shares In 2020, analytics showed that current assets increased by 25%, non- current assets increased by 20% and current liabilities by 10%. Half of the non-current liabilities were also paid. At the beginning of 2020, additional 250,000 shares were issued by Hercules Company. How much is the book value of Hercules Company as of December 31, 2019? pow ASSETS TOTAL UROILTICS a. Php1,250,000 go 000 490 000 b. Php1,650,000 J Yop 900 $00 00D c. Php2,150,000 “2 [gp 000 ~~ 4p0 OOD d. Php3,050,000 1250 00 = 9 10. Refer to Hercules Company. How much is the book value per shai 20197 a. Php3.05 1.250 000 b. Php2.15 1600 00D c. Php1.65 d. Php1.25 ( 11. Refpr to Hercules Company. How much is the net working capital * spree 31, 20202 GARRENT Acsors —- CARRENT URDILITES, a. Php247,500 9 0 X 1.96 4oo 00D XI.ld b. Php350,000 = c. Php497,500 Lan * Axo ovo d. Php937,500 WISP - 44000 . YagC00 = 8 12. Refer to Hercules Company. How much is the book value per _ Sees of December 31, 2020? a. Php1.93 WTAL asere What URS b. Php1.54 487 foo 440 0 c. Php1.25 _!e80 0 so 0H d.Php1.00 261 sv0 690 8D < \42F soo [12 006 = | .c4PTET atl) Ca 13,43 of December 31, 2020, Cocoa Corporation reported the 5 llowing items in its balance sheet: Cash Php 240,000 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 250,000 outstanding shares in 2020 Cocoa 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 cost 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 non-current assets reflected in the books of Cocoa Corporation as of December 31, 20207 \3 000 GOD a. Php4,960,000 Ra b. Php3,850,000 —— c. Php2,850,000 BBs OE d. Php2,150,000 ) 14. How much is the book value per share of Cocoa Corporation as _ beset 3, 20287 TOTAL ASSETS TOTO uni UTES. 26000 ao ocd. 00 a.Php19.84 eo coo (woo 06 280 ooo b.Php16.24 Se oe 1.906 006 > (ny c. Php15.84 — 3 90 000. a d. Php12.24 Psu 00 4UOOKH - 1900 C0 > SOLv oD c 35-460 man is the replacement value of the non-current assets of ‘coa Corporation? gocoob ¥ Lar = 8 DOOD 2. Php3,345,000 gy egy x O40 > ERE OOD b. Php3,850,000 —. c. Php4,345,000 434ro00 d. Php5,455,000| Weer ae ( 16. How much is the replacement value per share of Cocoa ToTAL BSE Corporation? Tom usd 3 5 OD a. Php21.82 aao 000 4D OD bomen c.Php14.22 3450 000 1000 at d.Php12.24 _ sasoo0 = —_——~ 3 4sSme ~ 'o0 000 = gsssooe alances in its balance 17. Caramel Company showed the following bi sheet as a year-end. ‘urrent Assets Php 450,000 Non-current Assets. 1,150,000 Current Liabilities 300,000 900,000 Non-current Liabilities 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 Caramel Company at year- 450 © end? 1150000 [HOOD a. Php584,000 ¥ -6D YO Ips ecb b. Php400,000 gap god 446000 ane c. Php1,784,000 ( 30000) Pp AE x -bS C con) d. Php1,600,000 | 935 000 .on. ES ut 2aq 000 ~Feqo00 A 18. Referto Caramel Company What is the book value per share of TOL RASETS, ‘ung Carafe! Company? 4so on 306 ©cO a. Php3.33 1180 000 oo 000 b. Php4.87 eT c. Php13.33 tanto 1400 d. Php14.87 > Heo OH [120008 * 79. Samsan 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AAU Nie ese) las AND METHODOLOGIES Current Assets 1,250,000 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. Samsan Company tried to trace back the costs of developing the patent and determined that the reproduction cost of that particular patent is at P3,000,000. What is the book value of Samsan Company? a. Php5,250,000 Term score tOTRL URS b. Php5,000,000 1 asp 00 Bso coo c. Php4,150,000 sco a 8 d.Php4,000,000 = asoo0e oats 2 SEO 20Refer to Samsan Company. What is the reproduction value of amsan Company? @ 006 006 a. Php§,000,000 _(2.¢e0 ood) b. Php4,650,000 ~ sao ad Increase c. Php4,150,000 se d. Php4,000,000 Tory assets TOT Ut {280 wb BED a ovo xo = Aes 00