all else equal, will an increase in inventory decrease or increase FCF? - answersdecrease FCF because the
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
investment in NWC goes up, lowering the overall FCF
ji ji ji ji ji ji ji ji ji
what is an example of a positive side effect? - answerssaving money through a synergy
ji ji ji ji ji ji ji ji ji ji ji ji ji ji
types of mutual funds - answersindex funds
ji ji ji ji ji ji
growth funds ji
income funds ji
sector funds ji
international funds ji
are sector funds diversified? - answersno because they only invest in one type of sector and although there
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
are different companies, they all will do the same thing
ji ji ji ji ji ji ji ji ji ji
degree of operating leverage - answers1 + (fixed costs / ebitda) ji ji ji ji ji ji ji ji ji ji
shows the % of fixed costs in overall expenses ji ji ji ji ji ji ji ji
what can we assume about the volatility caused by increasing fixed costs? - answersas fixed costs increase,
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
the volatility of EBITDA increases (and FCF increases)
ji ji ji ji ji ji ji ji
sensitivity analysis - answerswhen you choose one variable at a time and adjust its value to see the impact on ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
NPV
ji
scenario analysis - answers1. choose 2-3 possible outcomes and calculate NPV for each case ji ji ji ji ji ji ji ji ji ji ji ji ji
2. look at the range of NPVs --> however, if the worst case also has a positive NPV, it doesn't really matter
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
Monte Carlo simulation - answers1. assign a distribution of value for each variable
ji ji ji ji ji ji ji ji ji ji ji ji
2. choose a random value for each variable to calculate NPV (usually you'll do ~1000 trials_
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
3. calculate average expected NPV (will also give you std dev)
ji ji ji ji ji ji ji ji ji ji
what to include in initial cash flows (at year 0) - answersany one time expenses @ year 0
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
cost of PPE + installation costs, etc
ji ji ji ji ji ji
the NSV of any assets that are being sold
ji ji ji ji ji ji ji ji
T/F: the WACC is the one interest rate that is applied to EVERY project considered by a firm - answersfalse
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
T/F: preferred stock is considered short-term debt on the balance sheet - answersfalse
ji ji ji ji ji ji ji ji ji ji ji ji
T/F: a weakness of the multiples/comparables valuation method is that it ignores TVM and cost of capital -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
answerstrue
ji ji
the longer that the same multiple is used, the less accurate the valuation will be
ji ji ji ji ji ji ji ji ji ji ji ji ji ji
T/F: Modigliani and Miller's proposition without taxes says that capital structure is irrelevant to firm value -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
answerstrue
ji
T/F: when you buy an option called a "short", you expect the price of the asset to increase in the future -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
answersFalse - when you short a stock, you expect the asset's value to decrease
ji ji ji ji ji ji ji ji ji ji ji ji ji ji
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
investment in NWC goes up, lowering the overall FCF
ji ji ji ji ji ji ji ji ji
what is an example of a positive side effect? - answerssaving money through a synergy
ji ji ji ji ji ji ji ji ji ji ji ji ji ji
types of mutual funds - answersindex funds
ji ji ji ji ji ji
growth funds ji
income funds ji
sector funds ji
international funds ji
are sector funds diversified? - answersno because they only invest in one type of sector and although there
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
are different companies, they all will do the same thing
ji ji ji ji ji ji ji ji ji ji
degree of operating leverage - answers1 + (fixed costs / ebitda) ji ji ji ji ji ji ji ji ji ji
shows the % of fixed costs in overall expenses ji ji ji ji ji ji ji ji
what can we assume about the volatility caused by increasing fixed costs? - answersas fixed costs increase,
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
the volatility of EBITDA increases (and FCF increases)
ji ji ji ji ji ji ji ji
sensitivity analysis - answerswhen you choose one variable at a time and adjust its value to see the impact on ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
NPV
ji
scenario analysis - answers1. choose 2-3 possible outcomes and calculate NPV for each case ji ji ji ji ji ji ji ji ji ji ji ji ji
2. look at the range of NPVs --> however, if the worst case also has a positive NPV, it doesn't really matter
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
Monte Carlo simulation - answers1. assign a distribution of value for each variable
ji ji ji ji ji ji ji ji ji ji ji ji
2. choose a random value for each variable to calculate NPV (usually you'll do ~1000 trials_
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
3. calculate average expected NPV (will also give you std dev)
ji ji ji ji ji ji ji ji ji ji
what to include in initial cash flows (at year 0) - answersany one time expenses @ year 0
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
cost of PPE + installation costs, etc
ji ji ji ji ji ji
the NSV of any assets that are being sold
ji ji ji ji ji ji ji ji
T/F: the WACC is the one interest rate that is applied to EVERY project considered by a firm - answersfalse
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
T/F: preferred stock is considered short-term debt on the balance sheet - answersfalse
ji ji ji ji ji ji ji ji ji ji ji ji
T/F: a weakness of the multiples/comparables valuation method is that it ignores TVM and cost of capital -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
answerstrue
ji ji
the longer that the same multiple is used, the less accurate the valuation will be
ji ji ji ji ji ji ji ji ji ji ji ji ji ji
T/F: Modigliani and Miller's proposition without taxes says that capital structure is irrelevant to firm value -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
answerstrue
ji
T/F: when you buy an option called a "short", you expect the price of the asset to increase in the future -
ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji ji
answersFalse - when you short a stock, you expect the asset's value to decrease
ji ji ji ji ji ji ji ji ji ji ji ji ji ji
