1|Page
DISCOUNTED CASH FLOW MODEL EXAM
NEWEST 2025 ACTUAL EXAM COMPLETE 150
QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+
How do you get to Beta in the Cost of Equity calculation? -
ANSWER-You look up the Beta for each Comparable Company
(usually on Bloomberg), un-lever
each one, take the median of the set and then lever it based on
your company's capital
structure. Then you use this Levered Beta in the Cost of Equity
calculation.
Where can you look up information on Beta - ANSWER-
Bloomberg
Each company's capital structure is different and we want to
look at how "_____" a company is regardless of what % debt or
equity it has. - ANSWER-Risky
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Why do we re-lever at the end of a calculation? - ANSWER-But
at the end of the calculation, we need to re-lever it because we
want the Beta used in
the Cost of Equity calculation to reflect the true risk of our
company, taking into account its capital structure this time
Would you expect a manufacturing company or a technology
company to have a
higher Beta? - ANSWER-technology
which is more riskier and have a higher beta? manufacturing or
tech? - ANSWER-tech
Let's say that you use Levered Free Cash Flow rather than
Unlevered Free Cash
Flow in your DCF - what is the effect? - ANSWER-Levered
Free Cash Flow gives you Equity Value rather than Enterprise
Value, since the
cash flow is only available to equity investors (debt investors
have already been "paid"
with the interest payments).
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Leveraged Free Cash Flow gives you __________ value -
ANSWER-Equity Value
If you use leveraged free cash flow, what should you use as the
discount rate? - ANSWER-Cost of equity
In banking, do you use the gordon growth or multiples method
to calculate terminal value? - ANSWER-Multiples method
When would you use the gordon growth rate when calculating
the terminal value? - ANSWER-you have no good Comparable
Companies
or if you have reason to believe that multiples will change
significantly in the industry
several years down the road.
What's an appropriate growth rate to use when calculating the
Terminal Value? - ANSWER-Normally you use the country's
long-term GDP growth rate, the rate of inflation, or
something similarly conservative.
, 4|Page
Terminal Value: a long term growth rate over _% would be
considered aggressive - ANSWER-5%
How do you select the appropriate exit multiple when
calculating Terminal Value? - ANSWER-Normally you look at
the Comparable Companies and pick the median of the set,
When calculating TV, you always show a _________ of exit
multiples and what the TV looks like rather than picking a
specific number - ANSWER-range
So if the median EBITDA multiple of the set were 8x, you might
show a range of values
using multiples from ______________ - ANSWER-6x to 10x
Which method of calculating Terminal Value will give you a
higher valuation? - ANSWER-Multiples Method
In general, the Multiples Method will be more variable than the
Gordon Growth method
because exit multiples tend to span a wider range than possible
_______-term growth rates. - ANSWER-long
DISCOUNTED CASH FLOW MODEL EXAM
NEWEST 2025 ACTUAL EXAM COMPLETE 150
QUESTIONS AND CORRECT DETAILED
ANSWERS (VERIFIED ANSWERS) |ALREADY
GRADED A+
How do you get to Beta in the Cost of Equity calculation? -
ANSWER-You look up the Beta for each Comparable Company
(usually on Bloomberg), un-lever
each one, take the median of the set and then lever it based on
your company's capital
structure. Then you use this Levered Beta in the Cost of Equity
calculation.
Where can you look up information on Beta - ANSWER-
Bloomberg
Each company's capital structure is different and we want to
look at how "_____" a company is regardless of what % debt or
equity it has. - ANSWER-Risky
,2|Page
Why do we re-lever at the end of a calculation? - ANSWER-But
at the end of the calculation, we need to re-lever it because we
want the Beta used in
the Cost of Equity calculation to reflect the true risk of our
company, taking into account its capital structure this time
Would you expect a manufacturing company or a technology
company to have a
higher Beta? - ANSWER-technology
which is more riskier and have a higher beta? manufacturing or
tech? - ANSWER-tech
Let's say that you use Levered Free Cash Flow rather than
Unlevered Free Cash
Flow in your DCF - what is the effect? - ANSWER-Levered
Free Cash Flow gives you Equity Value rather than Enterprise
Value, since the
cash flow is only available to equity investors (debt investors
have already been "paid"
with the interest payments).
,3|Page
Leveraged Free Cash Flow gives you __________ value -
ANSWER-Equity Value
If you use leveraged free cash flow, what should you use as the
discount rate? - ANSWER-Cost of equity
In banking, do you use the gordon growth or multiples method
to calculate terminal value? - ANSWER-Multiples method
When would you use the gordon growth rate when calculating
the terminal value? - ANSWER-you have no good Comparable
Companies
or if you have reason to believe that multiples will change
significantly in the industry
several years down the road.
What's an appropriate growth rate to use when calculating the
Terminal Value? - ANSWER-Normally you use the country's
long-term GDP growth rate, the rate of inflation, or
something similarly conservative.
, 4|Page
Terminal Value: a long term growth rate over _% would be
considered aggressive - ANSWER-5%
How do you select the appropriate exit multiple when
calculating Terminal Value? - ANSWER-Normally you look at
the Comparable Companies and pick the median of the set,
When calculating TV, you always show a _________ of exit
multiples and what the TV looks like rather than picking a
specific number - ANSWER-range
So if the median EBITDA multiple of the set were 8x, you might
show a range of values
using multiples from ______________ - ANSWER-6x to 10x
Which method of calculating Terminal Value will give you a
higher valuation? - ANSWER-Multiples Method
In general, the Multiples Method will be more variable than the
Gordon Growth method
because exit multiples tend to span a wider range than possible
_______-term growth rates. - ANSWER-long
