Mergers and Acquisitions Exam Solutions
Course Introduction
This course provides a comprehensive overview of mergers and acquisitions (M&A), exploring the strategic, financial, legal, and operational aspects of corporate restructuring. Students will examine the motivations behind M&A activity, valuation techniques, deal structuring, and the due diligence process. The course covers negotiation strategies, regulatory considerations, post-merger integration challenges, and the impact of M&A on shareholder value. Through case studies and practical applications, students will gain insight into real-world transactions and develop analytical skills essential for careers in investment banking, consulting, and corporate development.
Recommended Textbook
Valuation Measuring and Managing the Value of Companies 6th Edition by McKinsey
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Chapter 1: Why Value Value
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Q1) Under which condition will a fast-growing firm create value?
A)It will create value in any circumstance.
B)If the return on invested capital (ROIC )is greater than the cost of obtaining funds.
C)If the return on invested capital (ROIc)is less than the cost of obtaining funds.
D)If the firm increases market share.
Answer: B
Q2) Aggressive use of leverage is the theme that links most major financial crises.
A)True
B)False
Answer: True
Q3) Which one of the following actions would help a company create long-term value?
A)Focus on keeping costs at a minimum.
B)Find the optimal debt-to-equity ratio.
C)Seek and exploit new sources of competitive advantage.
D)Monitor and follow macroeconomic trends.
Answer: C
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Chapter 2: Fundamental Principles of Value Creation
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Q1) Return on invested capital and revenue growth determine how revenues are converted into cash flows,and value is created only when return on invested capital is greater than cost of capital.
A)True
B)False Answer: True
Q2) Economic profit consists of the spread between ROIC and cost of capital and is useful in determining which business units or investment opportunities would create more value.
A)True
B)False Answer: True
Q3) When ROIC equals the cost of capital,there is no relationship between growth and value.
A)True
B)False Answer: True
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Chapter 3: Conservation of Value and the Role of Risk
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Q1) The primary way that financial engineering can create value is by lowering firm taxes.
A)True
B)False
Answer: True
Q2) Studies of share repurchases have shown that companies are very good at timing share repurchases.
A)True
B)False
Answer: False
Q3) The conservation of value principle states that anything that does not increase cash flows does not increase value.
A)True
B)False
Answer: True
Q4) Managers should hedge cash flow risk whenever possible.
A)True
B)False
Answer: False
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Chapter 4: The Alchemy of Stock Market Performance
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Q1) Which of the following are problems with expressing total returns to shareholders (TRS )in the traditional three-component format?
I.It does not distinguish the source of earnings growth.
II.It excludes return from moves in the overall market.
III.It does not account for the impact of financial leverage.
IV.It does not recognize that dividend yield can affect future earnings.
A)I and II only.
B)I,III,and IV only.
C)II,III,and IV only.
D)III and IV only.
Q2) What is the TRS from performance?
A)-2.0 percent.
B)0.0 percent.
C)1.4 percent.
D)7.0 percent.
Q3) What is the zero-growth return?
A)10.0 percent.
B)14.4 percent.
C)3.0 percent.
D)7.0 percent.
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Chapter 5: The Stock Market Is Smarter Than You Think
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Q1) Researchers have found that the stock market is very concerned with earnings volatility and requires companies to meet analyst expectations.
A)True
B)False
Q2) If investors focused on earnings,a move from FIFO to LIFO would increase the share price,but it generally does the opposite because of the decrease in cash flows.
A)True
B)False
Q3) Which of the following criteria do noise traders make bets on?
I.Short-term price movements.
II.Fundamental valuations.
III.Investing only in emerging markets.
A)I and II.
B)II and III.
C)I only.
D)II only.
Q4) Both the 2001 bubble and the 2007 bubble were valuation bubbles.
A)True
B)False
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Chapter 6: Return on Invested Capital
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Q1) A firm's additional costs for producing each additional unit of its product are essentially zero.The best term for describing the firm's product is that it is:
A)A Giffen good.
B)A normal good.
C)A scalable product.
D)An inferior good.
Q2) Which of the following industries is most likely to have the lowest ROIC (where goodwill has been removed)?
A)Software.
B)IT services.
C)Pharmaceuticals.
D)Paper packaging.
Q3) Both ROIC including goodwill and ROIC excluding goodwill have been increasing at a similar rate.
A)True
B)False
Q4) List and briefly explain the five sources of price premiums.
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8
Chapter 7: Growth
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Q1) For which situation does additional growth likely create more value?
A)High-ROIC company in a mature market.
B)Low-ROIC company in a fast-growing market.
C)Low-ROIC company in a mature market.
D)Medium-ROIC company in a mature market.
Q2) Incremental innovation will rarely create lasting value.
A)True
B)False
Q3) Companies that grow more slowly than 0 percent in one year generally within five years see their growth increase to:
A)About 4 percent and then up to 4.5 percent within 10 years.
B)About 1 percent and then up to 2 percent within 10 years.
C)About 6 percent and then up to 8 percent within 10 years.
D)About 8 percent and then up to 10 percent within 10 years.
Q4) Explain the "portfolio treadmill" effect and what it means for a firm that wishes to sustain growth.
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Chapter 8: Frameworks for Valuation
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Q1) A firm is financed with 62 percent debt and 38 percent equity.The pretax costs of debt and equity capital are 6.6 percent and 11.3 percent,respectively.What is the tax rate if the WACC is 7 percent?
A)31 percent.
B)34 percent.
C)37 percent.
D)64 percent.
Q2) Bigger Brewing Co.is a U.S.-based company that is undergoing a leveraged buyout with a projected capital structure of 80 percent debt in the near term.There is a projected loan repayment schedule,with the goal of having a capital structure of 50 percent debt in three years.Based on this information,the best methodology to value this firm would be the enterprise discounted cash flow methodology.
A)True
B)False
Q3) Which of the following is best to use when valuing a financial institution?
A)Enterprise discounted cash flow model.
B)Adjusted present value (APV).
C)Equity cash flow model.
D)Capital cash flow model.
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Page 10
Chapter 9: Reorganizing the Financial Statements
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Q1) In order to adjust for currency fluctuations,one should conduct a line-by-line removal of the currency effects.
A)True
B)False
Q2) What are Dolphin's NOPLAT and ROIC for the current year,using average invested capital?
A)$82,13.6 percent.
B)$108.9,18.1 percent.
C)$92,15.4 percent.
D)$85,14.1 percent.
Q3) Based on the above same table,what are the ROICs for Companiesy A,B,and C,respectively?
A)18 percent,12 percent,19 percent.
B)19 percent,17 percent,21 percent.
C)18 percent,16 percent,20 percent.
D)19 percent,17 percent,24 percent.
Q4) In computing free cash flow,include investments in capitalized operating leases in gross investment.
A)True
B)False
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Chapter 10: Analyzing Performance
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Q1) What is SnackCo's operating margin in year 2?
A)13.4 percent.
B)16.8 percent.
C)24.0 percent.
D)35.3 percent.
Q2) For a given company,the return on invested capital (ROIC )is 13.5 percent,the tax rate is 34 percent,and the pretax cost of debt is 8.8 percent.If its debt-to-equity ratio is equal to 2.0,what is the return on equity (ROE)?
A)16.30 percent.
B)17.80 percent.
C)28.88 percent.
D)25.30 percent.
Q3) To evaluate leverage in the recent low-interest-rate environment,many analysts are now evaluating debt multiples such as debt to EBITDA or debt to EBITA.
A)True
B)False
Q4) SnackCo is creating value in year 2.
A)True
B)False
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Chapter 11: Forecasting Performance
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Q1) In industries where prices are changing or technology is advancing,forecasters should strictly use financial drivers such as revenue.
A)True
B)False
Q2) When using PP&E as the forecast driver for depreciation,which of the following is most accurate?
A)From both an ideal and a practical standpoint,the driver should be net PP&E.
B)From both an ideal and a practical standpoint,the driver should be gross PP&E.
C)Ideally,the driver should be net PP&E,but practically the driver should be gross PP&E.
D)Ideally,the driver should be gross PP&E,but practically the driver should be net PP&E.
Q3) In forecasting the income statement,it is recommended to tie all items directly to revenue.
A)True B)False
Q4) The explicit forecast period must be long enough for the company to reach a steady state.List the two characteristics that define that steady state.
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Chapter 12: Estimating Continuing Value
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Q1) In the continuing-value formula for a company,NOPLAT should reflect an average level associated with the midpoint of the business cycle.
A)True
B)False
Q2) In estimating continuing value,how does assuming that RONIC = WACC as opposed to assuming RONIC WACC affect the importance of assumptions concerning growth?
A)Assumptions concerning growth do not change in importance.
B)Assumptions concerning growth become unimportant when RONIC = WACC.
C)Assumptions concerning growth become more important when RONIC = WACC.
D)Assumptions concerning growth become less important when RONIC = WACC but are still important.
Q3) Using today's P/E multiples to estimate continuing value is recommended.
A)True
B)False
Q4) In the continuing-value formula for a company,the growth rate g should be based on long-term real interest rates.
A)True
B)False
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Page 14
Chapter 13: Estimating the Cost of Capital
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Sample Questions
Q1) Researchers have concluded that an appropriate range of the equity risk premium for use in valuation models should be 10 to 12 percent.
A)True
B)False
Q2) Theoretically,one should discount each year's cash flow at a cost of equity that matches the maturity of the cash flow.However,for practical purposes,analysts typically choose a single yield to maturity that best matches the cash flow stream being valued.
A)True
B)False
Q3) A firm has 4,000,000 shares of stock outstanding with a price per share equal to $22.There are 200,000 bonds outstanding each priced at $995 each.The cost of equity is 14 percent,the cost of debt is 8 percent,and the corporate tax rate is 34 percent.What is the WACC?
A)10.3 percent.
B)9.8 percent.
C)8.0 percent.
D)8.8 percent.
Q4) Briefly explain the two methods of estimating market returns.
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Page 15
Chapter 14: Moving From Enterprise Value to Value Per Share
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Q1) Which of the following approaches are methods for evaluating convertible debt?
I.Market value.
II.Multiples value.
III.Black-Scholes value.
IV.Conversion value.
A)I and II only.
B)I and III only.
C)I,III,and IV only.
D)II,III,and IV only.
Q2) Company X controls Company Y so that Company Y's financial statements are fully consolidated in the group accounts.With respect to Company X's financial statements,third-party stakes in Company Y:
A)Are not of concern.
B)Are to be deducted and are called noncontrolling interest.
C)Are to be added in and are called noncontrolling interest.
D)Are illegal.
Q3) List three alternatives to discounted cash flow (DCF )analysis when estimating the value of a subsidiary of a parent company using only the parent company's financial information,and identify the conditions when each is recommended.
Page 16
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Chapter 15: Analyzing the Results
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Q1) If one arrives at a company value based on the valuation model that is significantly different from the market value,the default assumption should be that the market valuation is incorrect.
A)True
B)False
Q2) When estimating a company's value,falling within a range of plus or minus 15 percent of the actual valuation is appropriate,as market valuations of this amount for individual stocks are fairly common.
A)True
B)False
Q3) When using the scenario approach,an analyst should not shortcut the process by deducting the face value of debt from the scenario-weighted value of operations,because this would seriously underestimate the equity value,as the value of debt is different in each scenario.
A)True
B)False
Q4) List the criteria for assessing whether a model is technically robust with respect to the following three perspectives: unadjusted financial statements,rearranged financial statements,and statement of cash flows.
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Chapter 16: Using Multiples
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Q1) ComboCo,a large U.S.company,operates in two areas: high tech and retail clothing.To value this firm using multiples analysis,one should use a peer group of other large U.S.diversified companies.
A)True
B)False
Q2) Given the following inputs,compute the value-to-EBITA ratio: tax rate = 34%,growth rate = 5%,ROIC = 12%,and WACC = 8%.
A)3.14×
B)9.17×
C)12.83×
D)17.00×
Q3) Assuming the tax rate remains constant,what will be the effect on the value-to-EBITA ratio of doubling the following inputs: growth,ROIC,and WACC?
A)The value-to-EBITA ratio will fall,but the amount is uncertain.
B)The value-to-EBITA ratio will decrease by 50 percent.
C)The value-to-EBITA ratio will increase,but the amount is uncertain.
D)The value-to-EBITA ratio will double.
Q4) List the three requirements for carrying out a useful analysis of comparable multiples.
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Chapter 17: Valuation by Parts
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Q1) For multibusiness units,consolidated corporate results:
A)Must eliminate internal revenues,costs,and profits.
B)Are not possible.
C)Are computed by summing the inputs for each accounting entry across units.
D)Are computed by top-down algorithms that give estimated values based on the economic profit or cost of each entry.
Q2) Which of the following are issues an analyst typically encounters when creating financial statements for business units?
I.Allocating corporate overhead costs.
II.Dealing with intercompany transactions.
III.Understanding financial subsidiaries.
IV.Processing overwhelming amounts of public information.
A)I and II only.
B)II and III only.
C)I,II,and III only.
D)I,II,III,and IV.
Q3) Financing subsidiaries should be valued separately from other business units.
A)True
B)False
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Chapter 18: Taxes
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Q1) All deferred tax liabilities (DTLs )are classified as debt.
A)True
B)False
Q2) Operating taxes are computed as if the company were financed entirely with equity. A)True
B)False
Q3) The income tax footnote is a good source of information for deferred tax liabilities.
A)True
B)False
Q4) Identify warranty reserves as operating or nonoperating and as an asset or a liability.Explain how the required treatment of warranty reserves determines the relationship between cash and accrual-based taxes.
Q5) The most comprehensive method for computing operating taxes from public data is to begin with reported taxes and undo financing and nonoperating items one by one. A)True
B)False
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Chapter 19: Non-operating Items, Provisions, and Reserves
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Q1) List the three recommended steps in assessing the impact of nonoperating expenses and incorporating their information in cash flow forecasts.
Q2) Which of the following are typical nonoperating expenses?
I.Amortization expense.
II.Restructuring charges.
III.Litigation expenses.
IV.Purchased research and development (R&D).
A)I and II only.
B)I,II,and III only.
C)III and IV only.
D)I,II,III,and IV.
Q3) If litigation charges recur frequently and grow with revenue,the analyst should treat the charges as operating.
A)True
B)False
Q4) Product returns and warranties are nonoperating provisions that do not affect NOPLAT.
A)True
B)False
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Chapter 20: Leases and Retirement Obligations
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Q1) Although a company's ROIC will change following the adjustment for operating leases,its valuation should not change.
A)True
B)False
Q2) Using the formula that incorporates the rental expense,asset life,and an appropriate interest rate,compute the estimated value of a leased asset at the beginning of an accounting period.The rental expense for the ensuing period is $2,500,the relevant cost of debt is 6.2 percent,and the asset's life is 10 years.
A)$4,032.26
B)$15,432.10
C)$9,732.18
D)$40,572.58
Q3) Researchers at Ohio State University found that interest rates on unrated,unsecured debt were explained better by credit statistics adjusted for operating leases.
A)True
B)False
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22
Chapter 21: Alternative Ways to Measure Return on Capital
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Q1) Expensing items with long-term benefits will usually mean that the accounting statements will overstate the company's historical investment,which can artificially lower ROIC in later years,making a business appear less attractive than it really is.
A)True
B)False
Q2) According to U.S.Generally Accepted Accounting Principles (GAAP),which of the following must be expensed?
I.A patent developed by the firm.
II.A building.
III.Equipment.
IV.A distribution network.
A)I and II only.
B)I and IV only.
C)II and III only.
D)III and IV only.
Q3) If growth of a company is falling,expensing R&D will lead to an overestimation of the resulting drop in true performance.
A)True
B)False
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Chapter 22: Inflation
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Q1) Which of the following are true about inflation?
I.It depresses market valuations.
II.Investors tend to correctly perceive inflation.
III.It does not affect the cost of capital in real terms.
IV.It can affect the real-terms cash flows generated by companies.
A)I and II only.
B)I and IV only.
C)II and III only.
D)III and IV only.
Q2) With respect to growth and operating margins,which is/are likely to be overstated in times of high inflation?
A)Growth only.
B)Operating margins only.
C)Both growth and operating margins.
D)Neither growth nor operating margins.
Q3) Historical data shows that inflation leads to lower value creation in companies,because it erodes real-terms free cash flow (FCF )and increases the cost of capital.
A)True
B)False
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Chapter 23: Cross-Border Valuation
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Q1) List and describe the two methods for converting forecasted cash flows from one currency into another.
Q2) It is generally accepted practice to make ad hoc adjustments to the discount rate to reflect political risk,foreign-investment risk,or foreign-currency risk.
A)True
B)False
Q3) In the next two years,the expected inflation rates are 1 percent and 2 percent,respectively,and the real interest rates are expected to be 4 percent and 4 percent,respectively.Using this information,calculate the two-year interest rate yield as of now.
A)1.88 percent.
B)2.74 percent.
C)4.94 percent.
D)5.56 percent.
Q4) Market data across countries do show differences in realized premiums,and this is mainly because the markets have distinct systematic risk factors.
A)True
B)False
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25
Chapter 24: Case Study: Heineken
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Q1) Tax loss carryforwards are unrelated to any other balance sheet item and are treated as a separate nonoperating asset in invested-capital calculations.They do not affect NOPLAT.
A)True
B)False
Q2) Which of the following would be the most likely change(s )to be included in NOPLAT?
A)Changes in deferred taxes from tax rate revisions.
B)Change in deferred taxes as a result of acquisitions.
C)Change in deferred taxes as a result of the sale of a discontinued division.
D)Changes in deferred taxes from depreciation differences in net property,plant,and equipment (NPPE).
Q3) When calculating gross investments,it is appropriate to add the increase in the foreign-currency translation reserve to capital expenditures to obtain the actual cash spent on capital investments.
A)True
B)False
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Chapter 25: Corporate Portfolio Strategy
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Q1) Which of the following would be the LEAST likely way a private equity firm could add value to an acquired company?
A)Recapitalization.
B)Additional funds.
C)Distribution channels.
D)Managerial experience.
Q2) Which of the following are valid reasons a given firm might be the best owner of a particular business?
I.Unique links with other businesses (e.g. ,distribution lines).
II.Distinctive skills such as advertising.
III.Better governance.
IV.Better insight and foresight.
A)I and II only.
B)I,II,and III only.
C)II and IV only.
D)I,II,III,and IV.
Q3) Define corporate governance and describe the evidence of the role it can play in value creation from studies of the returns of private equity firms investing in companies.
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Chapter 26: Performance Management
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Q1) Which of the following are aspects of the firm that diagnostics of organizational health typically measure?
I.Its culture and values.
II.The depth of management talent.
III.The skills and capabilities of the company.
IV.Its ability to retain employees and keep them satisfied.
A)I,II,and III only.
B)I,III,and IV only.
C)II,III,and IV only.
D)I,II,III,and IV.
Q2) Which of the following is a value driver associated with improving long-term growth as opposed to return on invested capital (ROIC)?
A)Asset health.
B)Commercial health.
C)Capital productivity.
D)Cost structure health.
Q3) List and describe the three categories of short-term value drivers.
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28
Chapter 27: Mergers and Acquisitions
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Q1) A large acquisition occurring is a good predictor of an increase in acquisitions.
A)True
B)False
Q2) List the four components that determine the value created for the acquirer in an acquisition and whether an increase in each increases or decreases that value.
Q3) Which of the following are archetypical strategies that have a higher probability of creating value as opposed to being one of the more difficult strategies for creating value?
I.Using a roll-up strategy.
II.Consolidating to improve competitive behavior.
III.Consolidating to remove excess capacity from industry.
IV.Picking winners early and helping them develop their business.
A)I and II only.
B)I,III,and IV only.
C)II,III,and IV only.
D)III and IV only.
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Chapter 28: Divestitures
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Q1) Which of the following would be classified as a private divestiture?
I.Split-off.
II.Carve-out.
III.Trade sale.
IV.Joint venture.
A)I and II only.
B)I,II,and IV only.
C)II and III only.
D)III and IV only.
Q2) Whether or not a spin-off is part of a focus-improving strategy can be important with respect to how much value it creates.
A)True
B)False
Q3) According to data on more than 200 carve-outs announced before 1998,carve-out entities do not last.The majority of the subsidiaries were spun off further,acquired,or merged with other players.
A)True
B)False
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Chapter 29: Capital Structure, Dividends, and Share
Repurchases
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Q1) Which of the following is the correct order of financing choices according to the pecking-order theory,starting with the most preferred choice?
A)Internal funds,debt,equity.
B)Debt,equity,internal funds.
C)Internal funds,equity,debt.
D)Equity,internal funds,debt.
Q2) Which of the following is the most important factor in determining a company's credit rating?
A)Size.
B)Coverage.
C)Tax bracket.
D)Use of a complex capital structure.
Q3) Which of the following is most likely to have a negative effect on share price?
A)Issuing debt.
B)Issuing equity.
C)Dividend increase.
D)Extraordinary dividend.
Q4) Describe how leverage can cause business erosion.
Page 31
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Chapter 30: Investor Communications
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Q1) Do managers respond to increases in transparency by other firms and/or increases in the demands for transparency from investors?
A)No,managers do not respond to either.
B)Yes,managers respond positively to both.
C)Managers respond only to demands from investors but not to increases in the transparency of other firms.
D)Managers respond only to increases in the transparency of other firms but not to demands from investors.
Q2) In most industries,there is a fairly standardized level of transparency across firms.
A)True
B)False
Q3) In comparing growth versus value stocks,which of the following is NOT true?
A)Most stocks labeled as growth stocks have higher ROICs.
B)Most managers would like their firms to be growth stocks.
C)Growth stocks are usually stocks that have higher book and earnings multiples.
D)Most stocks labeled as growth stocks grow earnings and revenues faster than value stocks.
Q4) Describe the basic goal of good investor communications.
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Chapter 31: Emerging Markets
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Q1) For emerging markets,the recommended input for the risk-free rate for computing beta is:
A)The domestic government bond rate.
B)The average of the inflation rates of developed nations.
C)The average of the government bond rates of developed nations.
D)The U.S.Treasury bond rate plus the local inflation rate minus the U.S.inflation rate.
Q2) Given the following information for a company in a developing market,estimate the value of the company.The cash for the next year is estimated to be either $200 in the business-as-usual scenario or $50 in the distress scenario.The probabilities of the scenarios are 80 percent and 20 percent,respectively.The expected perpetual growth rate in each case is 5 percent per year,and the cost of capital is 11 percent.The value of the company is closest to:
A)$1,654.55
B)$2,500.00
C)$2,833.33
D)$3,333.33
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33
Chapter 32: Valuing High-Growth Companies
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Q1) When looking into the future,the analyst should define a point in the future where the company's performance is likely to stabilize.The conditions at that point should be defined and bounded by measures of operating performance.Which of the following are those measures of operating performance?
I.Amortization.
II.Penetration rates.
III.Sustainable gross margins.
IV.Average revenue per customer.
A)I and II only.
B)I and IV only.
C)II and III only.
D)II,III,and IV only.
Q2) When valuing a high-growth company,it is not recommended to begin with historical financial results;instead,begin with the future.
A)True
B)False
Q3) Contrast the first step in the valuation process of an established company and a high-growth company.Explain the reason for the difference in approaches.
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Chapter 33: Cyclical Companies
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Q1) Which of the following are true concerning the properties of consensus earnings forecasts for cyclical companies?
I.They account for the cyclical nature of the firm.
II.Discounted cash flow (DCF )models are usually consistent with the facts.
III.The forecasts usually show an upward-sloping trend.
IV.The earnings and cash flow projections of the market are consistent with company performance.
A)I and II only.
B)I and III only.
C)II and III only.
D)II and IV only.
Q2) The discounted cash flow (DCF )valuations of companies with cyclical earnings tend to be more volatile than those of less cyclical companies.But their share prices are much more stable.
A)True
B)False
Q3) The four-step approach for valuing cyclical companies requires a minimum of two scenarios.If an analyst is using only two scenarios,how should they be constructed?
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Chapter 34: Banks
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Q1) Which of the following correctly ranks the sources of income for European banks over the period 1988-2013?
A)Commission income > interest income > trading income.
B)Interest income > commission income > trading income.
C)Commission income > trading income > interest income.
D)Trading income > interest income > commission income.
Q2) Which of the following are included in other comprehensive income?
I.Hedging activities.
II.Foreign-currency translation items.
III.Unrealized losses on debt investments.
IV.Unrealized gains on equity investments.
A)I and II only.
B)I and IV only.
C)II,III,and IV only.
D)I,II,III,and IV.
Q3) The tax penalty on equity is a minor cost to a bank,and to simplify results,it can usually be left out of the valuation process.
A)True
B)False
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Chapter 35: Flexibility
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Q1) Which of the following are true with respect to using real-option valuation (ROV )versus decision tree analysis (DTA)?
I.ROV is recommended when the future cash flows are closely linked to traded commodities.
II.DTA is recommended when the future cash flows are closely linked to traded currencies.
III.DTA is recommended when most of the underlying risk can be diversified away.
IV.DTA is recommended when only rough estimates are available for required inputs such as the underlying asset value and variance.
A)I and II only.
B)II and III only.
C)I,III,and IV only.
D)I,II,III,and IV.
Q2) List the two contingent valuation approaches.Identify which one is more sophisticated and explain when the less sophisticated approach might be preferred.
Q3) List the three approaches that managers can take when flexibility is neither expected nor required to value assets or projects and the level of uncertainty under which each works best.
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