When Stock Is Issued in Exchange for Property, the Best

question 174

Multiple Choice

When stock is issued in exchange for property, the best evidence of fair value might be any of the following except:

• A) The appraised value of the property received.
• B) The selling price of the stock in a recent transaction.
• C) The price of the stock quoted on the stock exchange.
• D) The average book value of outstanding stock.

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Definitions:

Discount Rate

The interest rate that a central bank charges financial institutions for short-term loans, or used in discounted cash flow (DCF) analysis to present value future cash flows.

APR

The Annual Percentage Rate, which is the interest rate for a whole year on a loan, including fees.

Present Value Payback Period

A capital budgeting technique that calculates the period of time required for the present value of future cash flows to cover the initial investment cost.

NPV

Net Present Value, a calculation used to determine the current value of a series of future cash flows.