1. The primary difference between a discount rate and a capitalization rate is h

Question

1. The primary difference between a discount rate and a capitalization rate is how the discount rate (method) addresses

a.            Growth.

b.            Cash flow vs. earnings.

c.             terminal value

d.            Pretax vs. after-tax earnings.

2. Which of the following would not require a normalization entry?

A.            Excess owner’s compensation

B.            An extraordinary item

C.            The sell of a discontinued business segment

D.            An arm’s length relative party transaction

3. You calculate a closely held company

A.            Using the same techniques and methods as a publicly held company

B.            Using the CAPM model

C.            Differently than a publicly held company

D.            By calculating Beta

Explanation / Answer

1- (B) cash flow vs earning

2 (B) An extraordinary item

3 (A) Using the same techniques and methods as a publicly held company

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