CAIIB · Advanced Business & Financial Management · Module C — Valuation, Mergers & Acquisitions
CAIIB ABFM Unit 13 — Corporate Valuation: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper III of the December 2026 cycle (Sunday 13 December 2026)
This is the free practice page for CAIIB ABFM Unit 13 — Corporate Valuation (Module C — Valuation, Mergers & Acquisitions). The CAIIB Mock Centre holds 144 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
ABFM · Module C144 MCQs in the Mock Centre5 free belowPaper on 13 December
Key facts examiners test from this unit
Value and the approaches to corporate valuation — value the whole firm, not just its books: enterprise value and the market, income and cost approaches.
The adjusted book value approach — value the firm from its balance sheet, adjusted to replacement cost or liquidation value.
Market-based approaches — use market prices: of the firm's own securities, or of comparable properties and firms.
Changed since the textbook
Registered valuers' organisations need ₹25 lakh of capital (1 June 2026). Valuations required under the Companies Act, 2013 (section 247) must be done by registered valuers under the Companies (Registered Valuers and Valuation) Rules, 2017, administered by the Insolvency and Bankruptcy Board of India (IBBI), in three asset classes: land and building, plant and machinery, and securities or financial assets. The Amendment Rules dated 1 June 2026 require a registered valuers organisation to have paid-up share capital of at least ₹25 lakh; existing organisations must comply by 31 March 2028. Source: iPleaders
'Angel tax' on share premium abolished (1 April 2025). The Finance (No. 2) Act, 2024 provided that section 56(2)(viib) of the Income-tax Act, 1961 would not apply from assessment year 2025-26. The clause had taxed an unlisted company on share premium received above the fair market value of its shares, usually established by a DCF or net asset value report under Rule 11UA. The abolition covers all investors, and the Income-tax Act, 2025 has no equivalent clause. Source: TaxGuru
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 144 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
How does inflation make book values differ from market values?
Why (a): Book value is historical cost less depreciation, so it ignores inflation, while market values reflect current prices; that is one reason the two diverge. Inflation tends to raise, not lower, replacement and market values, and accounting standards do not restate book values for inflation. (b) is wrong: Inflation tends to raise, not lower, replacement and market values. (c) is wrong: Book values are not restated for inflation. (d) is wrong: Inflation affects tangible assets too.
Question 2 of 5
How are buildings and civil works valued under the replacement cost method?
Why (d): Under the replacement cost method, buildings and civil works are valued at what it would cost to replace them today, less an allowance for physical depreciation and deterioration. Book written-down value and indexed historical cost both start from the old cost, and recent sale prices belong to the comparison method. (a) is wrong: Book written-down value is what the method replaces. (b) is wrong: Indexed historical cost still starts from the old cost. (c) is wrong: Comparable sales belong to the comparison method.
Question 3 of 5
What does the principle of substitution, behind the direct comparison approach, state?
Why (c): A buyer will not pay more for a property than the cost of a comparable, competitive one with the same utility in the open market, without delay. (a) is wrong: Historical cost is not the test. (b) is wrong: The principle limits what buyers pay. (d) is wrong: It confuses financing with valuation.
Question 4 of 5
For a loan against rentals, a bank must value a shop let out on a long lease at market rent. There have been few recent sales of similar shops in the area. Which approach suits best?
Why (a): A let-out property's value rests on what it earns, so the income approach, which divides the net operating income by a capitalisation rate (or discounts the expected rents), suits it best, especially when comparable sales are scarce. Direct comparison needs recent sales of similar properties, and the stock and debt approach values a listed company, not a property. (b) is wrong: Rebuilding cost ignores what the shop earns. (c) is wrong: Direct comparison needs recent sales, which are scarce here. (d) is wrong: The stock and debt approach values a company's securities, not a property.
Question 5 of 5
Why is the cost of capital for DCF a weighted average of all sources?
Why (c): Free cash flow to the firm is the cash available to all providers of capital, so it is discounted at a rate reflecting all of them, weighted by their shares in the capital structure. Debt still has an after-tax cost, equity is usually the dearest source, and the weights follow the capital structure, not any legal rule. (a) is wrong: Debt has an after-tax cost. (b) is wrong: Equity is usually the dearest source. (d) is wrong: Weights follow the capital structure, not a legal rule.
0 of 5 answered.
Traps in this unit
Cash is deducted in EV, not added.
Reconcile several methods with reasons; do not just average.
Assets less all liabilities gives equity, not firm value.
Practise all 144 questions on Unit 13. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABFM Online Mock Centre unlocks all 4,000+ ABFM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.