Certified Valuation Analyst (CVA) Practice Exam

What is the standard of value for shareholder disputes in a healthy business under state statutes?

1. Fair value

2. Market value

3. Liquidation value

4. Investment value

The correct answer is: Fair value

In the context of shareholder disputes involving healthy businesses, "fair value" is typically recognized as the standard of value according to many state statutes. This standard is distinct from other valuation concepts as it focuses on a value that reflects an equitable distribution of ownership interests among shareholders, without consideration of minority discounts or control premiums. Fair value is particularly important in legal contexts, where the aim is to ensure that all parties involved in the dispute are treated fairly and equitably. It aims to provide a value that a willing buyer would pay to a willing seller, assuming neither party is under compulsion to buy or sell, and that both are knowledgeable about the relevant facts. In contrast, market value refers to the price at which an asset would trade in a competitive auction setting, which might not adequately reflect the interests and rights of minority shareholders in a dispute. Liquidation value is concerned with the net amount that could be obtained if the business were to cease operations and sell off its assets, which is not applicable in the context of a healthy business dispute. Investment value is more individualized, reflecting what a specific buyer would pay for the business based on their own circumstances and investment expectations, which can lead to varied, subjective estimates. Thus, in shareholder disputes within a