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NACVA CVA Exam - Topic 2 Question 16 Discussion

Most analysts agree that one of the most important factors in the estimation of the direct capitalization rate for the excess earnings is the perceived persistence of the excess earnings. The longer the time period and the greater the uncertainty of the expectation of excess earnings, the __________the direct capitalization rate.
A) Lower
B) Greater
C) fixed
D) It depends

NACVA CVA Exam - Topic 2 Question 16 Discussion

Actual exam question for NACVA's CVA exam
Question #: 16
Topic #: 2
[All CVA Questions]

Most analysts agree that one of the most important factors in the estimation of the direct capitalization rate for the excess earnings is the perceived persistence of the excess earnings. The longer the time period and the greater the uncertainty of the expectation of excess earnings, the __________the direct capitalization rate.

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Suggested Answer: A

by Buddy at May 08, 2022, 10:57 AM

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Mozell
8 months ago
It depends on the market conditions, can’t be too sure.
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Shawna
8 months ago
I agree with Elly, risk goes up with uncertainty!
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Maybelle
9 months ago
Surprised this is even a question, isn’t it obvious?
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Nada
9 months ago
I think it’s lower actually, less persistence should reduce the rate.
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Elly
9 months ago
Definitely greater, more uncertainty means higher risk!
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Kayleigh
9 months ago
I recall discussing this in class, and it seems like the answer could be A, but I’m not confident. It’s tricky when you think about how persistence affects expectations.
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Glendora
9 months ago
I practiced a similar question, and I feel like the longer the time period, the riskier it is, which could mean a greater rate. So I might lean towards B as well.
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Ivette
9 months ago
I'm not entirely sure, but I remember something about how greater uncertainty usually leads to a higher capitalization rate. So maybe it's B?
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Ashley
10 months ago
I think the answer might be A, lower, because if there's more uncertainty, it makes sense that the rate would decrease.
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Yuriko
10 months ago
I'm a little confused by this question. Does process capability just mean measuring the process, or does it also include the step of actually improving the process? I'll have to review my notes to be sure.
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Isidra
10 months ago
Yep, I agree with Emily. The key is to identify all the different components of the model and count them up. This should be a straightforward 7 parameters.
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Bulah
10 months ago
I'm a little confused by the wording of the question. Let me re-read it a few times to make sure I'm not missing anything.
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Annice
10 months ago
Hmm, I'm not sure. Defining the acceptance criteria might be just as important to ensure the project meets expectations.
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Eleonora
10 months ago
This is a tough one, but I'm going to take my time and work through it step-by-step. I don't want to rush and make a mistake.
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