1|Page
DISCOUNTED CASH FLOW MODEL EXAM, STUDYGUIDE LATEST
2025 ACTUAL EXAM WITH COMPLETE QUESTIONS AND CORRECT
DETAILED ANSWERS (100% VERIFIED ANSWERS) |ALREADY
GRADED A+| ||PROFESSOR VERIFIED||
When would you use the gordon growth rate when calculating the
terminal value? - ANSWER-you have no good Comparable
Companies
or if you have reason to believe that multiples will change
significantly in the industry
several years down the road.
What's an appropriate growth rate to use when calculating the
Terminal Value? - ANSWER-Normally you use the country's long-
term GDP growth rate, the rate of inflation, or
something similarly conservative.
Terminal Value: a long term growth rate over _% would be
considered aggressive - ANSWER-5%
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How do you select the appropriate exit multiple when calculating
Terminal Value? - ANSWER-Normally you look at the
Comparable Companies and pick the median of the set,
When calculating TV, you always show a _________ of exit
multiples and what the TV looks like rather than picking a specific
number - ANSWER-range
So if the median EBITDA multiple of the set were 8x, you might
show a range of values
using multiples from ______________ - ANSWER-6x to 10x
Which method of calculating Terminal Value will give you a higher
valuation? - ANSWER-Multiples Method
In general, the Multiples Method will be more variable than the
Gordon Growth method
because exit multiples tend to span a wider range than possible
_______-term growth rates. - ANSWER-long
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What's the flaw with basing terminal multiples on what public
company comparable are trading at? - ANSWER-The median
multiples may change greatly in the next 5-10 years so it may no
longer be
accurate by the end of the period you're looking at.
Flaw of basing terminal mulitples -This method is particularly
problematic with _____ industries - ANSWER-cyclical industries
How do you know if your DCF is too dependent on future
assumptions - ANSWER-if significantly more than 50% of the
company's Enterprise
Value comes from its Terminal Value, your DCF is probably too
dependent on future
assumptions
if significantly more than ____% of the company's Enterprise
Value comes from its Terminal Value, your DCF is probably too
dependent on future
assumptions. - ANSWER-50%
, 4|Page
In reality, almost all DCFs are "too ___ on future assumptions" -
ANSWER-dependent
it's actually
quite rare to see a case where the Terminal Value is less than
___% of the Enterprise Value. - ANSWER-50%
Should Cost of Equity be higher for a $5 billion or $500 million
market cap
company? - ANSWER-$500M
Using a ___________ in your calculation would also ensure
that Cost of Equity is higher for the $500 million company. -
ANSWER-Size Premium
What about WACC - will it be higher for a $5 billion or $500 million
company? - ANSWER-This is a bit of a trick question because it
depends on whether or not the capital structure
DISCOUNTED CASH FLOW MODEL EXAM, STUDYGUIDE LATEST
2025 ACTUAL EXAM WITH COMPLETE QUESTIONS AND CORRECT
DETAILED ANSWERS (100% VERIFIED ANSWERS) |ALREADY
GRADED A+| ||PROFESSOR VERIFIED||
When would you use the gordon growth rate when calculating the
terminal value? - ANSWER-you have no good Comparable
Companies
or if you have reason to believe that multiples will change
significantly in the industry
several years down the road.
What's an appropriate growth rate to use when calculating the
Terminal Value? - ANSWER-Normally you use the country's long-
term GDP growth rate, the rate of inflation, or
something similarly conservative.
Terminal Value: a long term growth rate over _% would be
considered aggressive - ANSWER-5%
,2|Page
How do you select the appropriate exit multiple when calculating
Terminal Value? - ANSWER-Normally you look at the
Comparable Companies and pick the median of the set,
When calculating TV, you always show a _________ of exit
multiples and what the TV looks like rather than picking a specific
number - ANSWER-range
So if the median EBITDA multiple of the set were 8x, you might
show a range of values
using multiples from ______________ - ANSWER-6x to 10x
Which method of calculating Terminal Value will give you a higher
valuation? - ANSWER-Multiples Method
In general, the Multiples Method will be more variable than the
Gordon Growth method
because exit multiples tend to span a wider range than possible
_______-term growth rates. - ANSWER-long
,3|Page
What's the flaw with basing terminal multiples on what public
company comparable are trading at? - ANSWER-The median
multiples may change greatly in the next 5-10 years so it may no
longer be
accurate by the end of the period you're looking at.
Flaw of basing terminal mulitples -This method is particularly
problematic with _____ industries - ANSWER-cyclical industries
How do you know if your DCF is too dependent on future
assumptions - ANSWER-if significantly more than 50% of the
company's Enterprise
Value comes from its Terminal Value, your DCF is probably too
dependent on future
assumptions
if significantly more than ____% of the company's Enterprise
Value comes from its Terminal Value, your DCF is probably too
dependent on future
assumptions. - ANSWER-50%
, 4|Page
In reality, almost all DCFs are "too ___ on future assumptions" -
ANSWER-dependent
it's actually
quite rare to see a case where the Terminal Value is less than
___% of the Enterprise Value. - ANSWER-50%
Should Cost of Equity be higher for a $5 billion or $500 million
market cap
company? - ANSWER-$500M
Using a ___________ in your calculation would also ensure
that Cost of Equity is higher for the $500 million company. -
ANSWER-Size Premium
What about WACC - will it be higher for a $5 billion or $500 million
company? - ANSWER-This is a bit of a trick question because it
depends on whether or not the capital structure
