2024 Trading Comps Modeling Exam Wall
Street Prep / Wall Street Prep Premium Exam
Transaction Comps Modeling Wall Street Prep
Exam GRADED A+
the terminal value of a business that grows indefinitely is calculated as follows -
✔✔✔ ANSWER -cash flow from period "t+1" divided by (discount rate-growth rate)
the two-stage DCF model is: - ✔✔✔ ANSWER -where stage 1 is an explicit projection of
free cash flows (generally for 5-10 years), and
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stage 2 is a lump -sum estimate of the cash flows beyond the explicit forecast period
disadvantages of a DCF do not include - ✔✔✔ ANSWER -free cash flows over the
first 5-10 year period represent a significant portion of value and are highly sensitive to
valuation assumptions
the typical sell -side process - ✔✔✔ ANSWER -shorter than the buy side, buyer secures
financing, and doesn't involve id'ing potential issues to address such as ownership and
unusual equity structures, liabilities, etc.
While equity contribution went as low as the single digits in the 1980's, the current split
between equity and debt in an LBO deal is best characterized as: - ✔✔✔ ANSWER -
Equity - 35%; Debt 65%
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent)
item? - ✔✔✔ ANSWER -Extraordinary gains/losses
what is false about depreciation and amortization - ✔✔✔ ANSWER - D&A may be
classified within interest expense
Company X's current assets increased by $40 million from 2007 - 2008 while the
companies current liabilities increased by $25
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million over the same period. the cash impact of the change in working capital was -
✔✔✔ ANSWER -a decrease of 15 million
the final component of an earnings projection model is calculating interest expense.
the calculation may create a circular reference because - ✔✔✔ ANSWER -interest
expense affects net income, which affects FCF, which affects the amount of debt a
company pays down, which, in turn affects the interest expense, hence the circu lar
reference
a 10-q financial filing has all of the following characteristics except -
✔✔✔ ANSWER -issued four times a year.
Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to which of the following -
✔✔✔ ANSWER -computers used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%,
and projected SG&A expenses of $2billion, what is the company's operating (EBIT)
margin? - ✔✔✔ ANSWER -45%
A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million,
what are the days sales outstanding -
✔✔✔ ANSWER -36.5 Powered by TCPDF (www.tcpdf.org)
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Street Prep / Wall Street Prep Premium Exam
Transaction Comps Modeling Wall Street Prep
Exam GRADED A+
the terminal value of a business that grows indefinitely is calculated as follows -
✔✔✔ ANSWER -cash flow from period "t+1" divided by (discount rate-growth rate)
the two-stage DCF model is: - ✔✔✔ ANSWER -where stage 1 is an explicit projection of
free cash flows (generally for 5-10 years), and
1 / 3
stage 2 is a lump -sum estimate of the cash flows beyond the explicit forecast period
disadvantages of a DCF do not include - ✔✔✔ ANSWER -free cash flows over the
first 5-10 year period represent a significant portion of value and are highly sensitive to
valuation assumptions
the typical sell -side process - ✔✔✔ ANSWER -shorter than the buy side, buyer secures
financing, and doesn't involve id'ing potential issues to address such as ownership and
unusual equity structures, liabilities, etc.
While equity contribution went as low as the single digits in the 1980's, the current split
between equity and debt in an LBO deal is best characterized as: - ✔✔✔ ANSWER -
Equity - 35%; Debt 65%
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent)
item? - ✔✔✔ ANSWER -Extraordinary gains/losses
what is false about depreciation and amortization - ✔✔✔ ANSWER - D&A may be
classified within interest expense
Company X's current assets increased by $40 million from 2007 - 2008 while the
companies current liabilities increased by $25
2 / 3
million over the same period. the cash impact of the change in working capital was -
✔✔✔ ANSWER -a decrease of 15 million
the final component of an earnings projection model is calculating interest expense.
the calculation may create a circular reference because - ✔✔✔ ANSWER -interest
expense affects net income, which affects FCF, which affects the amount of debt a
company pays down, which, in turn affects the interest expense, hence the circu lar
reference
a 10-q financial filing has all of the following characteristics except -
✔✔✔ ANSWER -issued four times a year.
Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to which of the following -
✔✔✔ ANSWER -computers used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%,
and projected SG&A expenses of $2billion, what is the company's operating (EBIT)
margin? - ✔✔✔ ANSWER -45%
A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million,
what are the days sales outstanding -
✔✔✔ ANSWER -36.5 Powered by TCPDF (www.tcpdf.org)
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