Certified Valuation Analyst (CVA) Practice Exam

Which of the following is NOT considered a premise of value?

1. Book value

2. Fair market value

3. Investment value

4. Going-concern value

The correct answer is: Investment value

The premise of value refers to the underlying assumptions regarding the circumstances and intentions of a valuation. It is important in determining how the value is assessed. Fair market value, book value, and going-concern value are all recognized premises of value, each reflecting specific contexts in which assets or businesses are valued. Fair market value is based on the price that a willing buyer would pay to a willing seller, assuming both parties are informed and acting in their own self-interest. Book value represents the value of an asset according to its balance sheet, while going-concern value reflects the continued operation of a business and its future earning potential. Investment value, on the other hand, is not considered a fundamental premise of value widely accepted in valuation theory. Investment value is subjective and varies depending on the specific preferences and requirements of a particular investor, making it less uniform and more situational than the other options listed. Thus, it does not fit the criteria of a widely applicable premise of value.