FINA 3000 POPE UGA TEST 3
QUESTIONS AND ANSWERS 100%
SOLVED
all else equal, will an increase in inventory decrease or increase FCF? -
ANSWERdecrease FCF because the investment in NWC goes up, lowering the overall
FCF
what is an example of a positive side effect? - ANSWERsaving money through a
synergy
types of mutual funds - ANSWERindex funds
growth funds
income funds
sector funds
international funds
are sector funds diversified? - ANSWERno because they only invest in one type of
sector and although there are different companies, they all will do the same thing
degree of operating leverage - ANSWER1 + (fixed costs / ebitda)
shows the % of fixed costs in overall expenses
what can we assume about the volatility caused by increasing fixed costs? -
ANSWERas fixed costs increase, the volatility of EBITDA increases (and FCF
increases)
sensitivity analysis - ANSWERwhen you choose one variable at a time and adjust its
value to see the impact on NPV
scenario analysis - ANSWER1. choose 2-3 possible outcomes and calculate NPV for
each case
2. look at the range of NPVs --> however, if the worst case also has a positive NPV, it
doesn't really matter
Monte Carlo simulation - ANSWER1. assign a distribution of value for each variable
2. choose a random value for each variable to calculate NPV (usually you'll do ~1000
trials_
3. calculate average expected NPV (will also give you std dev)
what to include in initial cash flows (at year 0) - ANSWERany one time expenses @
year 0
QUESTIONS AND ANSWERS 100%
SOLVED
all else equal, will an increase in inventory decrease or increase FCF? -
ANSWERdecrease FCF because the investment in NWC goes up, lowering the overall
FCF
what is an example of a positive side effect? - ANSWERsaving money through a
synergy
types of mutual funds - ANSWERindex funds
growth funds
income funds
sector funds
international funds
are sector funds diversified? - ANSWERno because they only invest in one type of
sector and although there are different companies, they all will do the same thing
degree of operating leverage - ANSWER1 + (fixed costs / ebitda)
shows the % of fixed costs in overall expenses
what can we assume about the volatility caused by increasing fixed costs? -
ANSWERas fixed costs increase, the volatility of EBITDA increases (and FCF
increases)
sensitivity analysis - ANSWERwhen you choose one variable at a time and adjust its
value to see the impact on NPV
scenario analysis - ANSWER1. choose 2-3 possible outcomes and calculate NPV for
each case
2. look at the range of NPVs --> however, if the worst case also has a positive NPV, it
doesn't really matter
Monte Carlo simulation - ANSWER1. assign a distribution of value for each variable
2. choose a random value for each variable to calculate NPV (usually you'll do ~1000
trials_
3. calculate average expected NPV (will also give you std dev)
what to include in initial cash flows (at year 0) - ANSWERany one time expenses @
year 0
