CFA Practice Question

There are 195 practice questions for this study session.

CFA Practice Question

What valuation approach can be used to determine the value of a venture capital investment?

A. Discounted cash flows.
B. Comparable companies approach.
C. Venture capital approach.
Correct Answer: C

Valuation techniques differ according to the nature of the investment. Early stage ventures require very different techniques than leveraged buyouts. For venture capital investment the discounted cash flows is usually not used since there is typically significant uncertainty about future cash flows. It is also hard to find comparable companies operating in the same field.

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