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5.0
FINANCIAL MODELING EXAM 2 QUESTIONS WITH
DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
List the five equivalent methods for firm and project valuation.
Ans: Equivalent Methods: Adjusted Present Value, Free Cash Flow to Equity,
Free Cash Flow to the Firm, Dividend Discount Model, Residual Income.
Valuation Methods: Free Cash Flow to Equity, Dividends, Tax Shield Benefit,
Free Cash Flow to the Firm, Economic Profit.
Fully list all the broad steps for calculating the Value Added by the Firm
with the Adjusted Present Value method in Figure 10.2.
Ans: a) Take the Free Cash Flow to the Firm and discount at he Unlevered
Cost of Equity Capital to get the Value of the Unlevered Firm.
b) Take the Tax Shield Benefit and discount at the Cost of Risk-free Debt to
get the Value of the Tax Shield.
c) Sum the Value of the Unlevered Firm and the Value if the Tax Shield to get
the Value of the Firm.
d) Subtract Date 0 Capital to get the Value Added by the Firm.
Fully list all the broad steps for calculating the Value Added by the Firm
with the Free Cash Flow to Equity method in Figure 10.3.
Ans: a) Take the Free Cash Flow to Equity and the discount at the Levered
Cost of Equity Capital to obtain the Value of Equity.
b) Take the Cash Flow to Debtholders and discount at the Cost of Risk-free
Debt to obtain the Value of Debt.
Sunday, 02 March 2025
, c) Sum the Value of the Equity and the Value of Debt to get the Value of the
Firm.
d) Subtract Date 0 Capital to get the Value Added by the Firm
Fully list all the broad steps for calculating the Value Added by the Firm
with the Free Cash Flow to Firm method in Figure 10.4.
Ans: a) Take the Free Cash Flow to the Firm and discount at the Cost of Firm
Capital (WACC) to obtain the Value of the Firm.
b) Subtract Date 0 Capital to get the Value Added by the Firm.
Fully list all the broad steps for calculating the Value Added by the Firm
with the Dividend Discount Model method in Figure 10.5.
Ans: a) Take the Dividends and discount at the Levered Cost of Equity
Capital to obtain the Value of the Equity.
b) Take the Cash Flow to Debtholders and discount at the Cost of Risk-free
Debt to obtain the Value of Debt.
c) Sum the Value of the Equity and the Value of Debt to get the Value of the
Firm.
d) Subtract Date 0 Capital to get he Value Added by the Firm.
Fully list all the broad steps for calculating the Value Added by Firm
with the Residual Income method in Figure 10.6.
Ans: a) Take the Economic Profit and discount at the Cost of the Firm Capital
(WACC) to obtain the Value of Economic Profit.
b) Add the Date 0 Book Value of the Firm to get the Value of the Firm.
c) Subtract Date 0 Capital to get the Value Added by the Firm.
Examstudy - Stuvia US
In today's fast-paced educational landscape, students need reliable resources to excel in their studies.
5.0
FINANCIAL MODELING EXAM 2 QUESTIONS WITH
DETAILED VERIFIED ANSWERS (100% CORRECT
ANSWERS) /ALREADY GRADED A+
List the five equivalent methods for firm and project valuation.
Ans: Equivalent Methods: Adjusted Present Value, Free Cash Flow to Equity,
Free Cash Flow to the Firm, Dividend Discount Model, Residual Income.
Valuation Methods: Free Cash Flow to Equity, Dividends, Tax Shield Benefit,
Free Cash Flow to the Firm, Economic Profit.
Fully list all the broad steps for calculating the Value Added by the Firm
with the Adjusted Present Value method in Figure 10.2.
Ans: a) Take the Free Cash Flow to the Firm and discount at he Unlevered
Cost of Equity Capital to get the Value of the Unlevered Firm.
b) Take the Tax Shield Benefit and discount at the Cost of Risk-free Debt to
get the Value of the Tax Shield.
c) Sum the Value of the Unlevered Firm and the Value if the Tax Shield to get
the Value of the Firm.
d) Subtract Date 0 Capital to get the Value Added by the Firm.
Fully list all the broad steps for calculating the Value Added by the Firm
with the Free Cash Flow to Equity method in Figure 10.3.
Ans: a) Take the Free Cash Flow to Equity and the discount at the Levered
Cost of Equity Capital to obtain the Value of Equity.
b) Take the Cash Flow to Debtholders and discount at the Cost of Risk-free
Debt to obtain the Value of Debt.
Sunday, 02 March 2025
, c) Sum the Value of the Equity and the Value of Debt to get the Value of the
Firm.
d) Subtract Date 0 Capital to get the Value Added by the Firm
Fully list all the broad steps for calculating the Value Added by the Firm
with the Free Cash Flow to Firm method in Figure 10.4.
Ans: a) Take the Free Cash Flow to the Firm and discount at the Cost of Firm
Capital (WACC) to obtain the Value of the Firm.
b) Subtract Date 0 Capital to get the Value Added by the Firm.
Fully list all the broad steps for calculating the Value Added by the Firm
with the Dividend Discount Model method in Figure 10.5.
Ans: a) Take the Dividends and discount at the Levered Cost of Equity
Capital to obtain the Value of the Equity.
b) Take the Cash Flow to Debtholders and discount at the Cost of Risk-free
Debt to obtain the Value of Debt.
c) Sum the Value of the Equity and the Value of Debt to get the Value of the
Firm.
d) Subtract Date 0 Capital to get he Value Added by the Firm.
Fully list all the broad steps for calculating the Value Added by Firm
with the Residual Income method in Figure 10.6.
Ans: a) Take the Economic Profit and discount at the Cost of the Firm Capital
(WACC) to obtain the Value of Economic Profit.
b) Add the Date 0 Book Value of the Firm to get the Value of the Firm.
c) Subtract Date 0 Capital to get the Value Added by the Firm.
Examstudy - Stuvia US
