Which of the Following Is NOT One of the Ways

question 18

Multiple Choice

Which of the following is NOT one of the ways whereby the value of a firm can be broken down into two or more subparts?

• A)(1 )Nonoperating assets and (2 )operating assets plus the present value of the depreciation tax shield.
• B)(1 )New product line and (2 )base business.
• C)(1 )The present value of continuing-value cash flow and (2 )the present value of the cash flow from the explicit forecast period.
• D)(1 )The present value of economic profit from continuing value,(2 )the present value of economic profit of the explicit forecast period,and (3 )invested capital.

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Definitions:

Fair Market Value

The price at which an asset would change hands between a willing buyer and a willing seller, both having reasonable knowledge of all relevant facts and neither being under compulsion to buy or sell.

Unrealized Increase

The increase in value of an asset that has not yet been sold or cashed in, thus not yet resulting in actual income.

Recognition

In accounting, recognition refers to the process of including an item in the financial statements of an entity, acknowledging it as an asset, liability, revenue, or expense.

Unrealized Holding

Refers to the increase or decrease in the value of an investment that has not yet been sold by the holder.