DCF Valuation Modeling Exam Questions and Answers 2024 with complete solution

1 | P a g e DCF Valuation Modeling Exam Questions and Answers 2024 with complete solution What are two b enefits of making a compacted DCF model - ANSWER >>>1. Helps us learn the main features of a DCF model 2. Helps in a situation where we need a quick analysis What are two important dates in a DCF - ANSWER >>>1. Timing of the cashflows 2. Date of Valuatio n The time value of money is also called the _______ - ANSWER >>>The time quantity of money What is the simplified formula to discount the cashflows - ANSWER >>>Unlevered Free Cash Flow (UFCF)/ Weighted Average Cost of Capital (WACC) 2 | P a g e What are the three types of valuation techniques? - ANSWER >>>Discounted Cashflow Analysis Comparable Trading Analysis President Transaction analysis Define Unlevered Free Cashflow - ANSWER >>>Cash flow available to all capital providers Define Weighted Average Cost of Capital - ANSWER >>>The cost of capital from all capital providers What is the Enterprise Value in a DCF using Free Cashflows - ANSWER >>>Enterprise value = PV of UFCF/WACC How long into the future should we forecast in a DCF? - ANSWER >>>In perpetuity (This is a common interview question) What are the two parts of a DCF? - ANSWER >>>1. Discrete Forecast 2. Terminal Value What is a terminal value of a firm? - ANSWER >>> When is the start and end of the discrete forecast? - ANSWER >>>It starts when the company is growing faster 3 | P a g e than the overall economy and ends when the company grows at the same rate of the economy When is the start and end of a Terminal Value forecast? - ANSWER >>>The Terminal value forecast starts when the company exp eriences the same amount of growth as the overall economy and then continues forever (Using a growing perpetuity formula) Perpetuity Growth formula - ANSWER >>>PV1=CF2/(R -G) PV=Present Value of cashflow CF=Cashflow of the next year R= Required Return G=Growth Rate What does Enterprise Value represent? - ANSWER >>>Our view of the companies value Equity Value formula - ANSWER >>>Equity Value = Enterprise Value - Net Debt What is Net Debt formula? - ANSWER >>>Total Debt - Cash = Net Debt