Adventis Level 2 Questions With Correct Answers

2 primary types of valuation - Answer relative and intrinsic relative valuation - Answer compare price of a company to the market value of similar assets intrinsic valuation - Answer value of a company through fundamental analysis around its ability to generate cash flow types of relative valuation - Answer comparable company analysis and acquisition comparables analysis comparable companies analysis (public trading comparables analysis) - Answer compare valuation of similar companies by comparing similar ratios (Enterprise Value/EBITDA, Enterprise Value/Revenue, Net Income/Earnings) acquisition comparables analysis (transaction comparables analysis) - Answer represent comparable acquisitions that have taken place and been publicly announced comparable companies or acquisition comparables analysis larger multiples - Answer acquisition comparables because typically need to pay a premium to the current share to gain control of company type of intrinsic valuation - Answer discounted cash flow (DCF) discounted cash flow analysis - Answer discounts all projected future cash flows of a company to the present using time value of money cash flow metric used in DCF - Answer unlevered free cash flow, represents cash flow available to all stakeholders in business why tax-effected EBIT used over net income - Answer valuation of company shouldn't be dependent on capital structure first component of determining present value of company - Answer calculate present value of each year's unlevered free cash flow, by discounting each year cash flow to present value using discount rate discount rate - Answer reflects cost of capital from the perspective of the stakeholder analyzing the company second component of determining PV of company - Answer calculate present value of all cash flow beyond projection period, terminal value methods of getting terminal value - Answer perpetuity method and EBITDA exit multiple method