- CFA Exams
- CFA Level I Exam
- Topic 8. Alternative Investments
- Learning Module 47. Introduction to Alternative Investments
- Subject 5. Private Capital
CFA Practice Question
The asset-based valuation approach arrives at the value of the private equity company to the:
A. debt and equity holders.
B. equity holders.
C. asset buyers.
Explanation: This approach values a company based its total underlying asset values less the value of any related liabilities.
User Contributed Comments 4
| User | Comment |
|---|---|
| Lt2201 | The answer should be debt & equity holders, since it's the asset based approach, NOT net asset based. That's why they call it NAV, not AV. |
| charliedba | that's so wrong, @Lt2201. It's for equity holders only. |
| ascruggs92 | ^Lt2201, you're thinking about it in terms of valuing a company from the prospective of a buyer. As PE is a partnership that owns individual investments, debt holders would just be a bank that extended credit, not a bond that was publicly issue. The bank uses its own measures to judge credit worthiness, only the equity holders (i.e. the partners) use the asset-based valuation to value the PE firm as a whole. |
| thebkr777 | ^Thank you for explaining it |