ADVENTIS FMC LEVEL 1 PRACTICE
EXAMINATION 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ A company has unlevered cash flow in years 1-5 of $10.0, $12.5, $13.5,
$14.0, and $15.0. EBITDA in year 5 is $10.0. What is the present value of
the terminal value, assuming a discount rate of 12.0% and an EBITDA
multiple of 6.0x..
Answer: $34
◍ All else being equal, what happens to investor returns if interest expense on
debt increases?.
Answer: investor returns decrease
◍ Transaction value =.
Answer: Net Debt + Purchase Price
◍ a company sold for $100M and the company being bought had $15M of
debt and $2M of cash, what happens and what is the transaction value and
purchase price.
Answer: - the $2M would be used by shareholders of the acquired company
to pay down existing $15M in debt to make $13M in debt now (15 - 2 = 13)-
the proceeds from the deal would then be used to pay down the remaining
debt (EV = CS + PS + Debt - Cash)- Result is 100 - 13 = 87- TV = $100M-
Purchase price = $87 (check to shareholders of acquired company)
◍ If you unlevered free cash flow of $10 in year 5, a perpetuity growth rate of
2.5% and a discount rate of 12.0%, what is the terminal value in today's
dollars?.
Answer: $61.22
◍ why is tax-effected EBIT used rather than net income.
, Answer: - the valuation should not depend on capital structure- applying the
tax-rate directly to EBIT without subtracting interest expense eliminates the
impact of capital structure to cash flow
◍ premium typically ranges between....
Answer: 20-40%
◍ Equity value is:.
Answer: shares outstanding * price per share
◍ which of the following statements about P/E multiple is false?.
Answer: it is dependent on capital structures and is therefore affected by
debt levels
◍ steps for DCF.
Answer: 1. project future cash flows2. discount future cash flows to their
PV's3. Find the PV of all cash flows beyond the projection period (terminal
value)
◍ You receive a loan for $20,000. The loan accumulates interest at a rate of
4.5%. How much will interest will you owe in 4 years?.
Answer: $3,850.37
◍ an investor puts $40 million of equity capital into a business in exchange for
90% equity stake. Three years later, the business is sold for 90 million
transaction value. When its sold, it has $10 million of debt and $3 million of
cash. What is the purchase price of the deal at exit?.
Answer: $83
◍ cash flow metric used for DCF analysis.
Answer: unlevered FCF
◍ are multiples for acquisition comparables higher or lower than mulitples for
comparable companies.
Answer: higher because acquirers need to pay a premium to the current
share price to gain control of the company
◍ Companies A and B both have revenue of $1,500 and EV/Revenue
EXAMINATION 2026 QUESTIONS WITH
ANSWERS GRADED A+
◍ A company has unlevered cash flow in years 1-5 of $10.0, $12.5, $13.5,
$14.0, and $15.0. EBITDA in year 5 is $10.0. What is the present value of
the terminal value, assuming a discount rate of 12.0% and an EBITDA
multiple of 6.0x..
Answer: $34
◍ All else being equal, what happens to investor returns if interest expense on
debt increases?.
Answer: investor returns decrease
◍ Transaction value =.
Answer: Net Debt + Purchase Price
◍ a company sold for $100M and the company being bought had $15M of
debt and $2M of cash, what happens and what is the transaction value and
purchase price.
Answer: - the $2M would be used by shareholders of the acquired company
to pay down existing $15M in debt to make $13M in debt now (15 - 2 = 13)-
the proceeds from the deal would then be used to pay down the remaining
debt (EV = CS + PS + Debt - Cash)- Result is 100 - 13 = 87- TV = $100M-
Purchase price = $87 (check to shareholders of acquired company)
◍ If you unlevered free cash flow of $10 in year 5, a perpetuity growth rate of
2.5% and a discount rate of 12.0%, what is the terminal value in today's
dollars?.
Answer: $61.22
◍ why is tax-effected EBIT used rather than net income.
, Answer: - the valuation should not depend on capital structure- applying the
tax-rate directly to EBIT without subtracting interest expense eliminates the
impact of capital structure to cash flow
◍ premium typically ranges between....
Answer: 20-40%
◍ Equity value is:.
Answer: shares outstanding * price per share
◍ which of the following statements about P/E multiple is false?.
Answer: it is dependent on capital structures and is therefore affected by
debt levels
◍ steps for DCF.
Answer: 1. project future cash flows2. discount future cash flows to their
PV's3. Find the PV of all cash flows beyond the projection period (terminal
value)
◍ You receive a loan for $20,000. The loan accumulates interest at a rate of
4.5%. How much will interest will you owe in 4 years?.
Answer: $3,850.37
◍ an investor puts $40 million of equity capital into a business in exchange for
90% equity stake. Three years later, the business is sold for 90 million
transaction value. When its sold, it has $10 million of debt and $3 million of
cash. What is the purchase price of the deal at exit?.
Answer: $83
◍ cash flow metric used for DCF analysis.
Answer: unlevered FCF
◍ are multiples for acquisition comparables higher or lower than mulitples for
comparable companies.
Answer: higher because acquirers need to pay a premium to the current
share price to gain control of the company
◍ Companies A and B both have revenue of $1,500 and EV/Revenue
