Financial Modeling and Analysis Exam
2
List the five equal methods for firm valuation - ANSAdjusted Present Value
Free Cash Flow to Equity
Free Cash Flow to the Firm
Dividend Discount Model
Residual Income
List the 5 equivalent techniques for undertaking valuation - ANSFree Cash Flow to Equity
Free Cash Flow to the Firm
Dividends
Tax Shield Benefit
Economic Profit
Fully list all the extensive steps for calculating the Value Added through the Firm with the
Adjusted Present Value method in Figure 10.3 - ANS1. Take the Free Cash Flow to the Firm
and cut price on the Unlevered Cost of Equity Capital
2. Take the Tax Shield Benefit and discount at the value of risk free debt
3. Sum the Value of the Unlevered Firm and the Value of the Tax Shield
4. Subtract Date 0 Capital
Fully listing all the huge steps for calculating the Value Added with the aid of the Firm with
the Free Cash Flow to Equity method in Figure 10.Four - ANS1. Take the Free Cash Flow to
Equity and cut price at the Levered Cost of Equity Capital to acquire the Value of Equity.
2. Take the Cash Flow to Debtholders and cut price on the Cost of Risk-free Debt to get the
Value of a Firm.
3. Subtract Date 0 Capital to get the Value Added by means of the Firm.
Fully list all of the extensive steps for calculating the Value Added through the Firm with the
Free Cash Flow to Firm approach in Figure 10.Five - ANS1. Take the Free Cash Flow to the
Firm and bargain on the cost of Firm Capital (WACC) to acquire the Value of the Firm.
2. Subtract Date zero Capital to get the Value Added with the aid of the Firm
Fully listing all the wide steps for calculating the Value Added by the Firm with the Dividend
Discount Model technique in Figure 10.6. - ANS1. Take the Dividends and bargain on the
Leveraged Cost of Equity Capital to obtain the Value of Equity.
2. Take the Cash Flow to Debtholders and cut price on the Cost of Riskfree Debt to reap the
Value of Debt.
3. Sum the Value of Equity and the Value of Debt to get the Value of the Firm.
4. Subtract Date 0 Capital to get the Value Added by using the Firm.
, Fully list all of the wide steps for calculating the Value Added by means of Firm with the
Residual Income technique in Figure 10.7. - ANS1. Take the Economic Profit and bargain on
the Cost of the Firm Capital (WACC) to acquire the Value of Economic Profit.
2. Add the Date 0 Book Value of the Firm to get the Value of the Firm.
Three. Subtract Date 0 Capital to get the Value Added by the Firm.
Fully kingdom the main benefit of forecasting the inflation charge one after the other for
calculating Net Present Value. - ANSIt guarantees consistency within the manner we method
the inflation element of cash flows in the numerator of the NPV calculation
and the discount rate inside the denominator of the NPV calculation
Fully explain why the Discount Rate is growing through the years in Figure 14.1. - ANSThe
increasing price of capital is compounded by way of the increasing inflation fee.
State all of the steps for calculating the Operating Cash Flow in Figure 14.2, starting with
Sales Revenue. - ANS1. Compute Sales Revenue
2. Sales - Variable Costs=Gross Margin
3. Depreciation + Cash Flows= Total Fixed Costs
4. Gross Margin - Total Fixed Costs= Operating Profit
5. Operating Profit - Taxes=Net Profit
6. Net Profit +Add Depreciation=Operating Cash Flow
Fully give an explanation for why the NPV falls from $five,822 in Figure 14.2 to $three,a
hundred and eighty in Figure 14.Four despite the fact that the investment in working capital
in years 1 to four is absolutely recovered in years 5 to 7. - ANSThe NPV declines because
the existing cost of later cash inflows is less than present value of earlier coins outflows
Based on the Data Table in Figure 14.6, if the Unit Sales Scale Factor is a hundred%, what
is the maximum Date 1 Real Cost of Capital at which the task can be ideal? Why? -
ANS15% is acceptable. After 15% the NPV will become negative and unacceptable.
Based at the Data Table in Figure 14.6, if the Date 1 Real Cost of Capital is 11.Zero%,
what's the minimum Unit Sales Scale Factor at which the project will be ideal? Why? -
ANSThe venture will be ideal is 90% because that is the primary sales element in which the
NPV is superb.
List the 4 number one variations among the With Investment and Without Investment Cash
Flows which are meditated in the Differential Project Cash Flows in row sixty two of Figure
15.2. - ANS1. The salvage price in year 5
2. The preliminary investment in year 0
three. A decrease in annual labor prices
four. An increase in annual depreciation
Explain why the Project NPV isn't very sensitive to With Investment Labor Costs, as
indicated in Figure 15.Three. - ANSLabor fees are a lot lower with funding, which makes up
for the distinction.
2
List the five equal methods for firm valuation - ANSAdjusted Present Value
Free Cash Flow to Equity
Free Cash Flow to the Firm
Dividend Discount Model
Residual Income
List the 5 equivalent techniques for undertaking valuation - ANSFree Cash Flow to Equity
Free Cash Flow to the Firm
Dividends
Tax Shield Benefit
Economic Profit
Fully list all the extensive steps for calculating the Value Added through the Firm with the
Adjusted Present Value method in Figure 10.3 - ANS1. Take the Free Cash Flow to the Firm
and cut price on the Unlevered Cost of Equity Capital
2. Take the Tax Shield Benefit and discount at the value of risk free debt
3. Sum the Value of the Unlevered Firm and the Value of the Tax Shield
4. Subtract Date 0 Capital
Fully listing all the huge steps for calculating the Value Added with the aid of the Firm with
the Free Cash Flow to Equity method in Figure 10.Four - ANS1. Take the Free Cash Flow to
Equity and cut price at the Levered Cost of Equity Capital to acquire the Value of Equity.
2. Take the Cash Flow to Debtholders and cut price on the Cost of Risk-free Debt to get the
Value of a Firm.
3. Subtract Date 0 Capital to get the Value Added by means of the Firm.
Fully list all of the extensive steps for calculating the Value Added through the Firm with the
Free Cash Flow to Firm approach in Figure 10.Five - ANS1. Take the Free Cash Flow to the
Firm and bargain on the cost of Firm Capital (WACC) to acquire the Value of the Firm.
2. Subtract Date zero Capital to get the Value Added with the aid of the Firm
Fully listing all the wide steps for calculating the Value Added by the Firm with the Dividend
Discount Model technique in Figure 10.6. - ANS1. Take the Dividends and bargain on the
Leveraged Cost of Equity Capital to obtain the Value of Equity.
2. Take the Cash Flow to Debtholders and cut price on the Cost of Riskfree Debt to reap the
Value of Debt.
3. Sum the Value of Equity and the Value of Debt to get the Value of the Firm.
4. Subtract Date 0 Capital to get the Value Added by using the Firm.
, Fully list all of the wide steps for calculating the Value Added by means of Firm with the
Residual Income technique in Figure 10.7. - ANS1. Take the Economic Profit and bargain on
the Cost of the Firm Capital (WACC) to acquire the Value of Economic Profit.
2. Add the Date 0 Book Value of the Firm to get the Value of the Firm.
Three. Subtract Date 0 Capital to get the Value Added by the Firm.
Fully kingdom the main benefit of forecasting the inflation charge one after the other for
calculating Net Present Value. - ANSIt guarantees consistency within the manner we method
the inflation element of cash flows in the numerator of the NPV calculation
and the discount rate inside the denominator of the NPV calculation
Fully explain why the Discount Rate is growing through the years in Figure 14.1. - ANSThe
increasing price of capital is compounded by way of the increasing inflation fee.
State all of the steps for calculating the Operating Cash Flow in Figure 14.2, starting with
Sales Revenue. - ANS1. Compute Sales Revenue
2. Sales - Variable Costs=Gross Margin
3. Depreciation + Cash Flows= Total Fixed Costs
4. Gross Margin - Total Fixed Costs= Operating Profit
5. Operating Profit - Taxes=Net Profit
6. Net Profit +Add Depreciation=Operating Cash Flow
Fully give an explanation for why the NPV falls from $five,822 in Figure 14.2 to $three,a
hundred and eighty in Figure 14.Four despite the fact that the investment in working capital
in years 1 to four is absolutely recovered in years 5 to 7. - ANSThe NPV declines because
the existing cost of later cash inflows is less than present value of earlier coins outflows
Based on the Data Table in Figure 14.6, if the Unit Sales Scale Factor is a hundred%, what
is the maximum Date 1 Real Cost of Capital at which the task can be ideal? Why? -
ANS15% is acceptable. After 15% the NPV will become negative and unacceptable.
Based at the Data Table in Figure 14.6, if the Date 1 Real Cost of Capital is 11.Zero%,
what's the minimum Unit Sales Scale Factor at which the project will be ideal? Why? -
ANSThe venture will be ideal is 90% because that is the primary sales element in which the
NPV is superb.
List the 4 number one variations among the With Investment and Without Investment Cash
Flows which are meditated in the Differential Project Cash Flows in row sixty two of Figure
15.2. - ANS1. The salvage price in year 5
2. The preliminary investment in year 0
three. A decrease in annual labor prices
four. An increase in annual depreciation
Explain why the Project NPV isn't very sensitive to With Investment Labor Costs, as
indicated in Figure 15.Three. - ANSLabor fees are a lot lower with funding, which makes up
for the distinction.
