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Investment Banking - Valuation Questions and answers What are the 3 major valuation methodologies? Public comps, precedent transactions, and the DCF. Public comps and precedent transactions are examples of relative valuation, and the DCF is an example of intrinsic valuation. Can you walk me through how to use public comps and precedents transactions? First, you select the companies and transactions based on criteria such as industry, financial metrics, and geography. Then you determine...

Chapter 6 Commonly Used Methods of Valuation Questions and Answer The three general approaches that need to be considered by the valuation analyst in each valuation engagement include: a. Income, Asset Based, and Excess Earnings b. Market, Treasury, and Income c. Income, Going Concern, and Market d. Income, Asset Based, and Market D is Correct— Income, Asset Based and Market refer to the three general approaches to valuation which a valuation analyst must consider in each valuation eng...

Introduction to Property Valuation Questions and Answers Compounding It is important to understand compound interest in valuation mathematics. It is the effect of earning interest on top of interest already received. Compounding is like rolling a snowball; the bigger your snowball gets, the more snow it picks up as it rolls. It begins to increase in size at a faster rate. Compound Interest - Question: You put £1000 in a savings account that pays 5% interest per annum. At the end of t...

Valuation Questions (Corporate Finance Theory) Questions and Answers Could you explain the concept of present value? The present value concept is based on the premise that "a dollar in the present is worth more than a dollar in the future" due to the time value of money. The reason is that money currently in possession can earn interest by being invested today. How do you calculate present value? Present Value (t=0) = Cash Flow^t=1 / (1 + r)^t=1 How does the concept of PV ...

Valuation Questions & Answers Advanced How do you value banks and financial institutions differently from other companies? You mostly use the same methodologies, except: 1. You look at P / E and P / BV (Book Value) multiples rather than EV / Revenue, EV / EBITDA, and other "normal" multiples, since banks have unique capital structures. 2. You pay more attention to bank-specific metrics like NAV (Net Asset Value) and you might screen companies and precedent transactions based on those i...

Valuation Questions & Answers Basic What are the 3 major valuation methodologies? Comparable Companies, Precedent Transactions and Discounted Cash Flow Analysis. Rank the 3 valuation methodologies from highest to lowest expected value. In general, Precedent Transactions will be higher than Comparable Companies due to the Control Premium built into acquisitions. Beyond that, a DCF could go either way and it's best to say that it's more variable than other methodologies. Often i...

Valuations & Loan Security Valuations Questions and Answers How does an equivalent yield differ from a net initial yield? Both single metrics, albeit net intitial yield does not account for rental fluctuations or void periods. In a discounted cash flow, what is the discount rate applied? The IRR. In targeted - set specific by a investor. If using DCF to detemine DCF output, the NPV will calcualte to £0, providing the appropriate IRR. How is the Equivalent Yield impacted by Ca...

Valuation Questions & Answers – Basic Questions and Answers What are the 3 major valuation methodologies? Comparable Companies, Precedent Transactions and Discounted Cash Flow Analysis. 2. Rank the 3 valuation methodologies from highest to lowest expected value Trick question - there is no ranking that always holds. In general, Precedent Transactions will be higher than Comparable Companies due to the Control Premium built into acquisitions. Beyond that, a DCF could go either way ...

M&I 400 Valuation Basic Questions and Answers Rank the 3 valuation methodologies from highest to lowest expected value. Precedent Transaction will usually produce a higher valuation than Comps because of the Control Premium associated with acquisitions. DCF has most variable value(usually the highest, but dependent on assumptions) When would you not use a DCF in a Valuation? A DCF should not be used for companies with unsteady/unstable cash flow(like tech or bio-tech firms) or when deb...

Valuation Interview Questions and Answers What are the 3 major valuation methodologies? Public Company Comparables (Public Comps), Precedent Transactions and the Discounted Cash Flow Analysis. Public Comps and Precedent Transactions are examples of relative valuation (based on market values) while the DCF is intrinsic valuation (based on cash flows.) Can you walk me through how you use Public Comps and Precedent Transactions? First you select the companies and transactions based on cri...

Financial Accounting Module 7 What are retained earnings, and how do you calculate them? Retained earnings is an owners' equity account that reflects the earnings that have been retained in the business to finance growth or future operations. Retained Earnings=Net Income +retained earnings of previous year - dividends to be paid What is the Free Cash Flow, and how do you calculate it? Free Cash Flow is an indication of how much actual cash is generated and available to be paid ou...

420 Forecasting + Valuation Practice Problems Questions and Answers Which type of financial statement analysis is most commonly used to create a baseline estimate for a financial forecast? Common-size analysis Damon estimates his beginning cash balance for June to be $10,000, with cash inflows of $4,000 and cash outflows of $6,000 for the month. Which of the following is true? Damon has a cash deficit of $2,000 that reduces his beginning cash balance. Debtors create projections ...

Investment Banking Valuation, Equity Value, and Enterprise Value Questions and Answers What are 4 industries where DCFs are not relevant? Commercial Banks Insurance Firms (Some) Oil & Gas Companies Real Estate Investment Trusts (REITs). What 4 factors do you use to pick comparable public companies? Example of a comps set title? Acronym: GIFT! - Geography (US? China? Europe? South America?). - Industry (Diversified Consumer? Food and Beverages specifically?). - Financials (R...

Valuation Questions & Answers – Advanced Questions and Answers Things to Keep in Mind These questions cover 3 different topics: 1. More advanced valuation methodologies. 2. Valuation nuances such as calendarization, non- recurring charges, and where to find information on deals and companies. 3. Industry-specific valuation and special cases, such as private companies, IPOs, and more. There are not that many truly "Advanced" interview questions on Valuation because most of the d...

M3 Financial Valuation Methods Questions and Answers Coldwell is using a constant growth dividend discount model to forecast the value of a share of common stock. Inherent in Coldwell's assumptions is the idea that: A. Stock price will grow at the same amount as the dividend. B. Dividends will grow at a rate faster than the presumed discount rate. C. Compounding growth is linear. D. Stock price will grow at the same rate as the dividend. D An underlying assumption of the constant gro...

Financial Statement Analysis and Valuation Midterm Questions and Answers F/S Analysis and Valuation 4-step Process 1. Understanding the business environment and Acct. Information 2. Adjusting and assessing Financial information and accounting info. 3. Forecasting financial information 4. Using information for valuation Demand for Financial Accounting Information 1. Managers and Employees (internal users) 2. Investment Analysts 3. Creditors and Suppliers 4. Stockholders and (board...

Valuation Methods Questions and Answers Public Comps Relative Valuation Method; Compare multiples to companies of a similar industry, finance, and geography Precedent Transactions Relative Valuation; Compare multiples at the time of purchase to companies of similar industry, finance, geography, and TIME. ALways higher b/c companies purchased at a higher price DCF Project FCF, discount to present value, sum FCF, add to discounted TV= Enterprise Value LBO Determine how mu...

Ch. 1 Introduction to Valuation Questions and Answers Perceptions of Value... ...have to be baked up by reality, which implies that the price that is paid for any asset should reflect the cash flows it is expected to generate. Myth 1: Since valuation models are quantitative, valuation is objective. The models used may be quantitative, but the inputs leave plenty of room for subjective judgments. 2 ways to reduce bias: 1) Avoid taking strong public positions on the value of a fi...

Valuation Questions & Answers How are the three main financial statements connected? -net income flows from the is into cash flow from operations on the cf statement -net income minus dividends is added to retained earnings from the prior periods balance sheet to come up with retained earning on the current periods balance sheet -beginning cash on the cf statement is cash on the current periods balance sheet If you could use only one financial statement to evaluate the financial state...

Property Valuation and Financial Analysis Questions and Answers ln the cost approach to appraisal, the phrase "reproduction cost" differs from "replacement cost." "Reproduction cost" measures the: present cost to build an exact replica of the property. Which of the following is not a part of the cost approach appraisal method? Capitalization. When a residence has a physical age of 20 years, but the appraiser notes the building has the appearance of being only 1...