3/10/25, 11:33 AM
WALL STREET PREP PREMIUM EXAM 2025 WITH
ACCURATE SOLUTIONS
1. Days in inventory is computed as:
inventory / COGS
365 / inventory turnover
COGS / average inventory
inventory turnover / 365
2. If Company Y's EBITDA increases to $4.0 billion by the exit year, while
maintaining the same EV/EBITDA multiple of 5.0x, what would be the new
enterprise value at exit?
$25 billion
$20 billion
$15 billion
$10 billion
3. If a company is considering acquiring another firm for $10 million, and the
target firm has a fundamental value of $15 million, what would be the impact
on shareholder value if the acquisition goes through?
The acquisition would likely destroy shareholder value.
The acquisition would have no impact on shareholder value.
The acquisition would likely create shareholder value.
The acquisition would increase the debt of the acquiring company.
4. Describe how the target EPS is adjusted to align with the acquirer's fiscal year
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,3/10/25, 11:33 AM
end in the transaction year.
2/47
,3/10/25, 11:33 AM
The target EPS is adjusted by simply averaging the target EPS for both
fiscal years.
The target EPS is adjusted by multiplying it by the acquirer's expected
EPS.
The target EPS remains unchanged regardless of the acquirer's fiscal
year.
The target EPS is adjusted by calculating the weighted average
based on the number of days until the acquirer's fiscal year end.
5. Which of the following is not considered an unusual or infrequent item on the
income statement?
Gain on sale property.
Income tax expense.
Discontinued operations.
Loss on condemnation.
6. Hidden Technologies Inc. (HTI) is expected to generate $75 million in free
cash flow next year, and it is expected to grow at a constant rate of 6% per
year. The firm has no debt or preferred stock and has a WACC of 9%. HTI has
50 million shares of stock outstanding. Using the corporate valuation model,
what is the value of the company's stock per share?
$40.00
$45.75
$55.25
$50.00
$43.33
3/47
, 3/10/25, 11:33 AM
7. Describe the significance of inventory days in assessing a company's
operational efficiency.
Inventory days measure the total revenue generated by a company in
a year.
Inventory days indicate how long it takes for a company to sell its
inventory, reflecting operational efficiency and cash flow
management.
Inventory days show the total amount of inventory held by a company.
Inventory days represent the average time taken to collect accounts
receivable.
8. Why would a debt holder focus on the Enterprise Value to EBITDA multiple
when assessing a leveraged buyout?
The multiple is used to assess the company's dividend payout ratio.
The multiple reflects the company's market capitalization only.
The Enterprise Value to EBITDA multiple provides insight into a
company's ability to generate cash flow relative to its total value,
which is crucial for debt repayment.
The multiple indicates the company's stock price performance over
time.
9. What formula is used to calculate future interest expense based on debt
balance?
Use the total equity value to estimate interest expense.
Apply a weighted average interest rate times the average debt
balance over the course of the year.
Multiply the total debt by the highest interest rate.
Calculate interest based on the previous year's cash flow.
4/47
WALL STREET PREP PREMIUM EXAM 2025 WITH
ACCURATE SOLUTIONS
1. Days in inventory is computed as:
inventory / COGS
365 / inventory turnover
COGS / average inventory
inventory turnover / 365
2. If Company Y's EBITDA increases to $4.0 billion by the exit year, while
maintaining the same EV/EBITDA multiple of 5.0x, what would be the new
enterprise value at exit?
$25 billion
$20 billion
$15 billion
$10 billion
3. If a company is considering acquiring another firm for $10 million, and the
target firm has a fundamental value of $15 million, what would be the impact
on shareholder value if the acquisition goes through?
The acquisition would likely destroy shareholder value.
The acquisition would have no impact on shareholder value.
The acquisition would likely create shareholder value.
The acquisition would increase the debt of the acquiring company.
4. Describe how the target EPS is adjusted to align with the acquirer's fiscal year
1/47
,3/10/25, 11:33 AM
end in the transaction year.
2/47
,3/10/25, 11:33 AM
The target EPS is adjusted by simply averaging the target EPS for both
fiscal years.
The target EPS is adjusted by multiplying it by the acquirer's expected
EPS.
The target EPS remains unchanged regardless of the acquirer's fiscal
year.
The target EPS is adjusted by calculating the weighted average
based on the number of days until the acquirer's fiscal year end.
5. Which of the following is not considered an unusual or infrequent item on the
income statement?
Gain on sale property.
Income tax expense.
Discontinued operations.
Loss on condemnation.
6. Hidden Technologies Inc. (HTI) is expected to generate $75 million in free
cash flow next year, and it is expected to grow at a constant rate of 6% per
year. The firm has no debt or preferred stock and has a WACC of 9%. HTI has
50 million shares of stock outstanding. Using the corporate valuation model,
what is the value of the company's stock per share?
$40.00
$45.75
$55.25
$50.00
$43.33
3/47
, 3/10/25, 11:33 AM
7. Describe the significance of inventory days in assessing a company's
operational efficiency.
Inventory days measure the total revenue generated by a company in
a year.
Inventory days indicate how long it takes for a company to sell its
inventory, reflecting operational efficiency and cash flow
management.
Inventory days show the total amount of inventory held by a company.
Inventory days represent the average time taken to collect accounts
receivable.
8. Why would a debt holder focus on the Enterprise Value to EBITDA multiple
when assessing a leveraged buyout?
The multiple is used to assess the company's dividend payout ratio.
The multiple reflects the company's market capitalization only.
The Enterprise Value to EBITDA multiple provides insight into a
company's ability to generate cash flow relative to its total value,
which is crucial for debt repayment.
The multiple indicates the company's stock price performance over
time.
9. What formula is used to calculate future interest expense based on debt
balance?
Use the total equity value to estimate interest expense.
Apply a weighted average interest rate times the average debt
balance over the course of the year.
Multiply the total debt by the highest interest rate.
Calculate interest based on the previous year's cash flow.
4/47
