• 2013 Accounts receivable of $400 million
Wall Street Prep Premium • 2014 Accounts receivable of $600 million
Exam:Transaction Comps Modeling Wall • 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
Street Prep Exam • 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent) What are the inventory days for the company? - Answer - 65.7 days
item? - Answer - Extraordinary gains/losses
Which of the following is true - Answer - Coca Cola's brand name is not reflected as an
what is false about depreciation and amortization - Answer - D&A may be classified intangible asset on its balance sheet
within interest expense
A company has the following information:
Company X's current assets increased by $40 million from 2007-2008 while the • 2014 share repurchase plan of $4 billion
companies current liabilities increased by $25 million over the same period. the cash • Average share price of $60 for the year 2013
impact of the change in working capital was - Answer - a decrease of 15 million • Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your financial
the final component of an earnings projection model is calculating interest expense. the model? - Answer - 60.6 million
calculation may create a circular reference because - Answer - interest expense affects
net income, which affects FCF, which affects the amount of debt a company pays down, non-controlling interest - Answer - is an expense on the income statement and equity o
which, in turn affects the interest expense, hence the circular reference the balance sheet
a 10-q financial filing has all of the following characteristics except - Answer - issued A company has the following information:
four times a year. • 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
Depreciation Expense found in the SG&A line of the income statement for a
• Capex of $200 million in 2014
manufacturing firm would most likely be attributable to which of the following - Answer -
computers used by the accounting department • Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
If a company has projected revenues of $10 billion, a gross profit margin of 65%, and What is the retained earnings balance at the end of 2014? - Answer - 15 billion
projected SG&A expenses of $2billion, what is the company's operating (EBIT) margin?
- Answer - 45% in order to find out how much cash is available to pay down short term debt, such as
revolving credit line, you must take - Answer - beginning cash balance + pre-debt cash
A company has the following information, 1. 2014 revenues of $5 billion,2013 Accounts flows - min. cash balance - required principal payments of LT and other debt
receivable of $400 million, 2014 accounts receivable of $600 million, what are the days
sales outstanding - Answer - 36.5 to calculate interest expense in the future, you should do which of the following -
Answer - apply a weighted average interest rate times the average debt balance over
A company has the following information: the course of the year
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
, enterprise (transaction) value represents the: - Answer - value of all capital invested in a Year 2014 2015 2016 2017 2018 2019 2020
business Free Cash Flow 110 120 150 170 200 250 280
A debt holder would be primarily concerned with which of the following multiples? You estimate that the weighted average cost of capital (WACC) for Company X is 10%
I. Enterprise (Transaction) Value / EBITDA and assume that free cash flows grow in perpetuity at 3.0% annually beyond
II. Price/Earnings 2020, the final projected year. According to the discounted cash flow valuation
III. Enterprise (Transaction) Value / Sales - Answer - 1 and 3 only method, Company X shares are: - Answer - .13 per share overvalued
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million the formula for discounting any specific period cash flow in period "t"is: - Answer - cash
shares outstanding. The company has net debt of $300 million. After building an flow from period "t" divided by (1+discount rate raised exponentially to "t"
earnings model for Company X, you have projected free cash flow for each year
through 2020 as follows: the terminal value of a business that grows indefinitely is calculated as follows - Answer
- cash flow from period "t+1" divided by (discount rate-growth rate)
Year 2014 2015 2016 2017 2018 2019 2020
Free Cash Flow 110 120 150 170 200 250 280 the two-stage DCF model is: - Answer - where stage 1 is an explicit projection of free
cash flows (generally for 5-10 years), and stage 2 is a lump-sum estimate of the cash
You estimate that the weighted average cost of capital (WACC) for Company X is 10% flows beyond the explicit forecast period
and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the
final projected year. Estimate the present value of the projected free cash flows through disadvantages of a DCF do not include - Answer - free cash flows over the first 5-10
2020, discounted at the stated WACC. Assume all cash flows are generated at the end year period represent a significant portion of value and are highly sensitive to valuation
of the year (i.e., no mid-year adjustment): - Answer - 837 million assumptions
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million the typical sell-side process - Answer - shorter than the buy side, buyer secures
shares outstanding. The financing, and doesn't involve id'ing potential issues to address such as ownership and
company has net debt of $300 million. After building an earnings model for Company X, unusual equity structures, liabilities, etc.
you have projected free cash flow for each year through 2014 as follows:
the following happened in a recent M&A transaction: 1. PP&E of the target company
Year 2014 2015 2016 2017 2018 2019 2020 was increased from its original book basis of $600 million to $800 million to reflect fair
Free Cash Flow 110 120 150 170 200 250 280 market value for book purposes in accordance with the purchase method of accounting.
2. no "step-up" for tax purposes. 3. original tax basis of $650 million. assuming a
You estimate that the weighted average cost of capital (WACC) for Company X is 10% corporate tax rate of 35% for book purposes, the company should record the following -
and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the Answer - A deferred tax liability equal to $52.5 million
final projected year. Calculate Company X's implied Enterprise Value by using the
discounted cash flow method: - Answer - 2951.2 million An acquisition creates shareholder value: - Answer - when a company acquires a
business whose fundamental value is higher than the purchase price
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million
shares outstanding. The • Acquirer purchases 100% of target by issuing additional stock to purchase target
company has net debt of $300 million. After building an earnings model for Company X, shares
you have projected free cash flow for each year through 2014 as follows: • No premium is offered to the current target share price
• Acquirer share price at announcement is $30
Wall Street Prep Premium • 2014 Accounts receivable of $600 million
Exam:Transaction Comps Modeling Wall • 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
Street Prep Exam • 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What is generally not considered to be a pre-tax non-recurring (unusual or infrequent) What are the inventory days for the company? - Answer - 65.7 days
item? - Answer - Extraordinary gains/losses
Which of the following is true - Answer - Coca Cola's brand name is not reflected as an
what is false about depreciation and amortization - Answer - D&A may be classified intangible asset on its balance sheet
within interest expense
A company has the following information:
Company X's current assets increased by $40 million from 2007-2008 while the • 2014 share repurchase plan of $4 billion
companies current liabilities increased by $25 million over the same period. the cash • Average share price of $60 for the year 2013
impact of the change in working capital was - Answer - a decrease of 15 million • Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your financial
the final component of an earnings projection model is calculating interest expense. the model? - Answer - 60.6 million
calculation may create a circular reference because - Answer - interest expense affects
net income, which affects FCF, which affects the amount of debt a company pays down, non-controlling interest - Answer - is an expense on the income statement and equity o
which, in turn affects the interest expense, hence the circular reference the balance sheet
a 10-q financial filing has all of the following characteristics except - Answer - issued A company has the following information:
four times a year. • 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
Depreciation Expense found in the SG&A line of the income statement for a
• Capex of $200 million in 2014
manufacturing firm would most likely be attributable to which of the following - Answer -
computers used by the accounting department • Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
If a company has projected revenues of $10 billion, a gross profit margin of 65%, and What is the retained earnings balance at the end of 2014? - Answer - 15 billion
projected SG&A expenses of $2billion, what is the company's operating (EBIT) margin?
- Answer - 45% in order to find out how much cash is available to pay down short term debt, such as
revolving credit line, you must take - Answer - beginning cash balance + pre-debt cash
A company has the following information, 1. 2014 revenues of $5 billion,2013 Accounts flows - min. cash balance - required principal payments of LT and other debt
receivable of $400 million, 2014 accounts receivable of $600 million, what are the days
sales outstanding - Answer - 36.5 to calculate interest expense in the future, you should do which of the following -
Answer - apply a weighted average interest rate times the average debt balance over
A company has the following information: the course of the year
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
, enterprise (transaction) value represents the: - Answer - value of all capital invested in a Year 2014 2015 2016 2017 2018 2019 2020
business Free Cash Flow 110 120 150 170 200 250 280
A debt holder would be primarily concerned with which of the following multiples? You estimate that the weighted average cost of capital (WACC) for Company X is 10%
I. Enterprise (Transaction) Value / EBITDA and assume that free cash flows grow in perpetuity at 3.0% annually beyond
II. Price/Earnings 2020, the final projected year. According to the discounted cash flow valuation
III. Enterprise (Transaction) Value / Sales - Answer - 1 and 3 only method, Company X shares are: - Answer - .13 per share overvalued
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million the formula for discounting any specific period cash flow in period "t"is: - Answer - cash
shares outstanding. The company has net debt of $300 million. After building an flow from period "t" divided by (1+discount rate raised exponentially to "t"
earnings model for Company X, you have projected free cash flow for each year
through 2020 as follows: the terminal value of a business that grows indefinitely is calculated as follows - Answer
- cash flow from period "t+1" divided by (discount rate-growth rate)
Year 2014 2015 2016 2017 2018 2019 2020
Free Cash Flow 110 120 150 170 200 250 280 the two-stage DCF model is: - Answer - where stage 1 is an explicit projection of free
cash flows (generally for 5-10 years), and stage 2 is a lump-sum estimate of the cash
You estimate that the weighted average cost of capital (WACC) for Company X is 10% flows beyond the explicit forecast period
and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the
final projected year. Estimate the present value of the projected free cash flows through disadvantages of a DCF do not include - Answer - free cash flows over the first 5-10
2020, discounted at the stated WACC. Assume all cash flows are generated at the end year period represent a significant portion of value and are highly sensitive to valuation
of the year (i.e., no mid-year adjustment): - Answer - 837 million assumptions
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million the typical sell-side process - Answer - shorter than the buy side, buyer secures
shares outstanding. The financing, and doesn't involve id'ing potential issues to address such as ownership and
company has net debt of $300 million. After building an earnings model for Company X, unusual equity structures, liabilities, etc.
you have projected free cash flow for each year through 2014 as follows:
the following happened in a recent M&A transaction: 1. PP&E of the target company
Year 2014 2015 2016 2017 2018 2019 2020 was increased from its original book basis of $600 million to $800 million to reflect fair
Free Cash Flow 110 120 150 170 200 250 280 market value for book purposes in accordance with the purchase method of accounting.
2. no "step-up" for tax purposes. 3. original tax basis of $650 million. assuming a
You estimate that the weighted average cost of capital (WACC) for Company X is 10% corporate tax rate of 35% for book purposes, the company should record the following -
and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the Answer - A deferred tax liability equal to $52.5 million
final projected year. Calculate Company X's implied Enterprise Value by using the
discounted cash flow method: - Answer - 2951.2 million An acquisition creates shareholder value: - Answer - when a company acquires a
business whose fundamental value is higher than the purchase price
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million
shares outstanding. The • Acquirer purchases 100% of target by issuing additional stock to purchase target
company has net debt of $300 million. After building an earnings model for Company X, shares
you have projected free cash flow for each year through 2014 as follows: • No premium is offered to the current target share price
• Acquirer share price at announcement is $30
