WALL STREET PREP PREMIUM PRACTICE EXAM QUESTIONS WITH CORRECT DETAILED ANSWERS | ALREADY GRADED A+RECENT VERSION

WALL STREET PREP PREMIUM PRACTICE EXAM QUESTIONS WITH CORRECT DETAILED ANSWERS | ALREADY GRADED A+RECENT VERSION 1. What is generally not considered to be a pre-tax non-recurring (unusual or infrequent) item? - answer Extraordinary gains/losses 2. what is false about depreciation and amortization - answer D&A may be classified within interest expense 3. Company X's current assets increased by $40 million from while the companies current liabilities increased by $25 million over the same period. the cash impact of the change in working capital was - answer a decrease of 15 million 4. the final component of an earnings projection model is calculating interest expense. the 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, which, in turn affects the interest expense, hence the circular reference 5. a 10-q financial filing has all of the following characteristics except - answer issued four times a year. 6. Depreciation Expense found in the SG&A line of the income statement for a manufacturing firm would most likely be attributable to which of the following - answer computers used by the accounting department 7. If a company has projected revenues of $10 billion, a gross profit margin of 65%, and projected SG&A expenses of $2billion, what is the company's operating (EBIT) margin? - answer 45% 8. A company has the following information, 1. 2014 revenues of $5 billion,2013 Accounts receivable of $400 million, 2014 accounts receivable of $600 million, what are the days sales outstanding - answer 36.5 9. A company has the following information: • 2014 Revenues of $8 billion • 2014 COGS of $5 billion • 2013 Accounts receivable of $400 million • 2014 Accounts receivable of $600 million • 2013 Inventories of $1 billion • 2014 Inventories of $800 million • 2013 Accounts payable of $250 million • 2014 Accounts payable of $300 million What are the inventory days for the company? - answer 65.7 days 10. Which of the following is true - answer Coca Cola's brand name is not reflected as an intangible asset on its balance sheet 11. A company has the following information: • 2014 share repurchase plan of $4 billion • Average share price of $60 for the year 2013 • Expected EPS growth for 2014 of 10% What should the number of shares repurchased by the company be in your financial model? - answer 60.6 million 12. non-controlling interest - answer is an expense on the income statement and equity o the balance sheet 13. A company has the following information: • 2013 retained earnings balance of $12 billion • Net income of $3.5 billion in 2014 • Capex of $200 million in 2014 • Preferred dividends of $100 million in 2014 • Common dividends of $400 million in 2014 What is the retained earnings balance at the end of 2014? - answer 15 billion 14. 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 flows - min. cash balance - required principal payments of LT and other debt 15. 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 the course of the year 16. enterprise (transaction) value represents the: - answer value of all capital invested in a business 17. A debt holder would be primarily concerned with which of the following multiples? I. Enterprise (Transaction) Value / EBITDA II. Price/Earnings III. Enterprise (Transaction) Value / Sales - answer 1 and 3 only 18. What is the keyboard shortcut to move sheets within a workbook? - answer Alt H O M 19. What is the keyboard shortcut to open the formatting cells dialog box? - answer ctrl 1 20. What are the keyboard shortcuts for auto-fitting a range of columns? - answer 1. Select the columns by hitting Ctrl Spacebar 2) Hold down the shift key and use left and right arrow keys to highlight the range of columns 3) Hit Alt H O I to auto fit the columns 21. When you are in the Format Cells dialog (Ctrl 1): 1) What is the keyboard shortcut for moving across tabs (Number, Alignment, Font Border, Fill, Protection)? 2)How do you move counter clockwise across form elements? 3)How do you select a checkbox (put a checkbox next to it) - answer 1) Ctrl Tab, 2) Shift Tab 3) Spacebar 22. All of the following are keyboard shortcut that allow the user input to add more sheets to a workbook EXCEPT: - answer Alt h i w 23. What is a keyboard shortcut to open a file? - answer Ctrl o 24. What is the recommended workbook calculation setting for Excel - answer Automatic except for Data Tables 25. To add a cell reference from a different worksheet into an existing formula with your keyboard , you should follow the following steps: - answer 1. Hit F2 to get into the existing formula 2. Holding down Ctrl, use PageUp or PageDown to find the desired worksheet 3. Let go of the Ctrl and PageUp/Down keys 4. Use the arrow keys to locate the desired cell reference 5. Hit enter 26. You estimate that the weighted average cost of capital (WACC) for Company X is 10% 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 2020, discounted at the stated WACC. Assume all cash flows are generated at the end of the year (i.e., no mid-year adjustment): - answer 837 million 27. On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year through 2014 as follows: Year Free Cash Flow 250 280 You estimate that the weighted average cost of capital (WACC) for Company X is 10% and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final projected year. Calculate Company X's implied Enterprise Value by using the discounted cash flow method: - answer 2951.2 million On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year through 2014 as follows: Year Free Cash Flow 250 280 28. You estimate that the weighted average cost of capital (WACC) for Company X is 10% and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final projected year. According to the discounted cash flow valuation method, Company X shares are: - answer .13 per share overvalued 29. the formula for discounting any specific period cash flow in period "t"is: - answer cash flow from period "t" divided by (1+discount rate raised exponentially to "t" 30. 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) 31. 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 flows beyond the explicit forecast period 32. disadvantages of a DCF do not include - answer free cash flows over the first 5-10 year period represent a significant portion of value and are highly sensitive to valuation assumptions 33. the typical sell-side process - answer shorter than the buy side, buyer secures financing, and doesn't involve id'ing potential issues to address such as ownership and unusual equity structures, liabilities, etc. 34. the following happened in a recent M&A transaction: 1. PP&E of the target company was increased from its original book basis of $600 million to $800 million to reflect fair 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 corporate tax rate of 35% for book purposes, the company should record the following - answer A deferred tax liability equal to $52.5 million 35. An acquisition creates shareholder value: - answer when a company acquires a business whose fundamental value is higher than the purchase price • Acquirer purchases 100% of target by issuing additional stock to purchase target shares • No premium is offered to the current target share price • Acquirer share price at announcement is $30 • Target share price at announcement is $50 • Acquirer EPS next year is $3.00 • Target EPS next year is $2.00 • Acquirer has 4 thousand shares outstanding • Target has 2 thousand shares outstanding 36. What is the exchange ratio for the deal? - answer 1.7x • Acquirer purchases 100% of target by issuing additional stock to purchase target shares • No premium is offered to the current target share price • Acquirer share price at announcement is $30 • Target share price at announcement is $50 • Acquirer EPS next year is $3.00 • Target EPS next year is $2.00 • Acquirer has 4 thousand shares outstanding • Target has 2 thousand shares outstanding Assuming a 40% tax rate, what are the necessary pre-tax synergies needed to break-even? - answer 37. Pushdown accounting: - answer Refers to the establishment of a new accounting and reporting basis in an acquired company's separate financial statements 38. Use the following information to answer the question below:• Acquirer purchases 100% of target by issuing $100 million in new debt to purchase target shares, carrying an interest rate of 10% • Excess cash is used to help pay for the acquisition • Acquirer expects to be able to close down several of the target company's old manufacturing facilities and save an estimated $2 million in the first year • Target PP&E is written up by $25 million to fair market value • Investment bankers, accountants, and consultants on the deal earned $30 million in fees Which of the following adjustments would be made to the pro forma income statement? - answer Advisory fee expense of $30 million Depreciation expense increase due to PP&E write-up Pre-tax synergies of $2 million 39. Use the following information to answer the question below: • Acquisition takes place on July 1, 2013 • Acquirer FYE - June 30 • Target FYE - December 31 • Acquirer expected EPS for FYE June 2014 is $2.40 • Target consensus EPS for FYE Dec 2013 is $1.12 • Target consensus EPS for FYE Dec 2014 is $1.78 Assuming 360 days in a year for simplicity, calculate target EPS adjusted to acquirer FYE in the transaction year (FYE June 2014) - answer $1.45 40. A 338(h)(10) election: - answer Requires that both buyer and seller must jointly elect to have the IRS deem the acquisition an asset sale for tax purposes 41. A good LBO candidate has which of the following characteristics? - answer Little to no existing leverage, steady cash flows and little investment in business through capex and working capital