FINANCIAL STATEMENT MODELLING EXAM-REAL ACTUAL EXAM-LATEST
UPDATE 2025 | COMPLETE QUESTIONS WITH CORRECT DETAILED AND
VERIFIED ANSWERS | RATED 100% CORRECT!! ALREADY GRADED A+ |
GUARANTEED PASS!!
Market beta is a statistical coefficient that reflects a company's historical stock price
volatility relative to:
A) All industry competitors in the world
B) Risk free government bonds
C) All securities in the market
D) All firms of comparable market value - (answers)C) All securities in the market
Google has a market beta of 1.16, if the market increases by 1.2% on a given day we
would expect that Google's stock price would:
A) Increase by 1.39%
B) Increase by 2.36%
C) Decrease by 1.86%
D) Increase by 1.16% - (answers)A) Increase by 1.39%
1.16 x 1.2%
When calculating the cost of debt capital you must multiply the average borrowing rate
by:
,A) Marginal income tax rate
B) 1 - Marginal income tax rate
C) The effective tax rate
D) 1 - Statutory corporate rate - (answers)B) 1 - Marginal income tax rate
The weighted average cost of capital is used when valuing the payoffs:
A) To equity holders
B) To debt holders
C) To both equity and debt holders
D) To equity holders less the payoff to debt holders - (answers)C) To both equity and debt
holders
If a company has preferred stock, the cost of preferred equity used in the company's
weighted average cost of capital calculation is:
A) Ignored
B) Equal to the preferred dividend rate
C) Equal to the preferred dividend rate multiplied by 1 - marginal income tax rate
D) Equal to the cost of equity capital - (answers)B) Equal to the preferred dividend rate
The proper discount rate when using the dividend discount valuation model is the:
A) Weighted average cost of capital
B) Cost of equity capital
C) Cost of debt capital
, D) Average borrowing rate - (answers)B) Cost of equity capital
The dividend discount valuation model equates the current stock price to:
A) All future expected dividends
B) All future expected dividends discounted by the weighted average cost of capital
C) All future expected dividends discounted by the cost of equity capital
D) The current dividend divided by current earnings per share - (answers)C) All future expected
dividends discounted by the cost of equity capital
Firms can increase free cash flow to the firm (FCFF) in the short run by cutting back on
investment in fixed assets. (t/f) - (answers)true
The price one is willing to pay for a common stock is positively related to expected free
cash flows to the firm (FCFF) and negatively related to the required rate of return. (t/f) -
(answers)true
The DCF valuation of a firm's equity involves the following three steps:
a) Forecast free cash flows to the firm (FCFF) for the horizon period.
b) Forecast discount FCFF for the terminal period.
c) Sum the horizon and terminal periods to yield firm value.
(t/f) - (answers)false
*Sum the horizon and terminal periods to yield firm value.* --> have to bring it to present value
UPDATE 2025 | COMPLETE QUESTIONS WITH CORRECT DETAILED AND
VERIFIED ANSWERS | RATED 100% CORRECT!! ALREADY GRADED A+ |
GUARANTEED PASS!!
Market beta is a statistical coefficient that reflects a company's historical stock price
volatility relative to:
A) All industry competitors in the world
B) Risk free government bonds
C) All securities in the market
D) All firms of comparable market value - (answers)C) All securities in the market
Google has a market beta of 1.16, if the market increases by 1.2% on a given day we
would expect that Google's stock price would:
A) Increase by 1.39%
B) Increase by 2.36%
C) Decrease by 1.86%
D) Increase by 1.16% - (answers)A) Increase by 1.39%
1.16 x 1.2%
When calculating the cost of debt capital you must multiply the average borrowing rate
by:
,A) Marginal income tax rate
B) 1 - Marginal income tax rate
C) The effective tax rate
D) 1 - Statutory corporate rate - (answers)B) 1 - Marginal income tax rate
The weighted average cost of capital is used when valuing the payoffs:
A) To equity holders
B) To debt holders
C) To both equity and debt holders
D) To equity holders less the payoff to debt holders - (answers)C) To both equity and debt
holders
If a company has preferred stock, the cost of preferred equity used in the company's
weighted average cost of capital calculation is:
A) Ignored
B) Equal to the preferred dividend rate
C) Equal to the preferred dividend rate multiplied by 1 - marginal income tax rate
D) Equal to the cost of equity capital - (answers)B) Equal to the preferred dividend rate
The proper discount rate when using the dividend discount valuation model is the:
A) Weighted average cost of capital
B) Cost of equity capital
C) Cost of debt capital
, D) Average borrowing rate - (answers)B) Cost of equity capital
The dividend discount valuation model equates the current stock price to:
A) All future expected dividends
B) All future expected dividends discounted by the weighted average cost of capital
C) All future expected dividends discounted by the cost of equity capital
D) The current dividend divided by current earnings per share - (answers)C) All future expected
dividends discounted by the cost of equity capital
Firms can increase free cash flow to the firm (FCFF) in the short run by cutting back on
investment in fixed assets. (t/f) - (answers)true
The price one is willing to pay for a common stock is positively related to expected free
cash flows to the firm (FCFF) and negatively related to the required rate of return. (t/f) -
(answers)true
The DCF valuation of a firm's equity involves the following three steps:
a) Forecast free cash flows to the firm (FCFF) for the horizon period.
b) Forecast discount FCFF for the terminal period.
c) Sum the horizon and terminal periods to yield firm value.
(t/f) - (answers)false
*Sum the horizon and terminal periods to yield firm value.* --> have to bring it to present value
