Question #5 - Reading 19 Equity Valuation - Applications and Processes

Reading: Reading 19 Equity Valuation - Applications and Processes

PDF File: Reading 19 Equity Valuation - Applications and Processes.pdf

Page: 4

Status: Incorrect

Correct Answer: B

Your Answer: B

Shared Context

- Using Heller's suggestion of an analyst intrinsic value which is $1.20 too high in the illustrative example for Article One, calculate the valuation error and the actual mispricing: Valuation error Actual mispricing A) $1.20 $0.15 B) $1.35 $0.15 C) $0.15 $1.20

Question

In response to Heller's point regarding the Linpan discussion in Article Two, which of the following correctly identifies the suggested valuation method?

Answer Choices:

A. Going Concern Valuation

B. Liquidation Value

C. Orderly Liquidation Value

Explanation

The proceeds raised by selling assets over a longer period of time are likely to be larger than those raised in a rapid forced "fire sale." Hence, the term Orderly Liquidation Value is often used to differentiate from a forced liquidation value.

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