Wall Street Prep Premium Exam
Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is the formula for calculating enterprise value (EV)?
✔✔ EV = Equity Value + Total Debt + Preferred Stock + Minority Interest − Cash and Cash
Equivalents.
How do you calculate free cash flow to the firm (FCFF)?
✔✔ FCFF = EBIT × (1 − Tax Rate) + Depreciation & Amortization − Capital Expenditures −
Change in Net Working Capital.
What is the difference between enterprise value and equity value?
✔✔ Enterprise value reflects the total value of the company including debt, while equity value
reflects only the value attributable to shareholders.
How is EBITDA calculated from the income statement?
✔✔ EBITDA = Operating Income + Depreciation + Amortization.
1
,What is the purpose of a sensitivity analysis in financial modeling?
✔✔ To assess how changes in key assumptions impact valuation or financial outcomes.
How do you calculate the weighted average cost of capital (WACC)?
✔✔ WACC = (E/V) × Re + (D/V) × Rd × (1 − Tax Rate), where E = equity, D = debt, V = E + D.
What is the primary use of a discounted cash flow (DCF) model?
✔✔ To estimate the intrinsic value of a company based on projected future cash flows
discounted at WACC.
How do you calculate net working capital (NWC)?
✔✔ NWC = Current Assets − Current Liabilities.
What is the difference between operating cash flow and free cash flow?
✔✔ Operating cash flow measures cash generated from core operations; free cash flow accounts
for capital expenditures and changes in working capital.
What is the formula for calculating terminal value using the perpetuity growth method?
2
, ✔✔ Terminal Value = Final Year Free Cash Flow × (1 + g) / (WACC − g), where g is the growth
rate.
How do you calculate the price-to-earnings (P/E) ratio?
✔✔ P/E Ratio = Market Price per Share / Earnings per Share.
What is the effect of issuing debt on a company’s WACC, assuming cost of debt is lower than
cost of equity?
✔✔ Issuing debt generally decreases WACC due to the lower after-tax cost of debt.
How do you calculate unlevered free cash flow?
✔✔ Unlevered FCF = EBIT × (1 − Tax Rate) + Depreciation & Amortization − Capital
Expenditures − Change in NWC.
What is the purpose of performing a comparable company analysis (comps)?
✔✔ To value a company based on valuation multiples of similar public companies.
How do you calculate levered beta for a company?
3
Questions and Answers | Latest
Version | 2025/2026 | Correct & Verified
What is the formula for calculating enterprise value (EV)?
✔✔ EV = Equity Value + Total Debt + Preferred Stock + Minority Interest − Cash and Cash
Equivalents.
How do you calculate free cash flow to the firm (FCFF)?
✔✔ FCFF = EBIT × (1 − Tax Rate) + Depreciation & Amortization − Capital Expenditures −
Change in Net Working Capital.
What is the difference between enterprise value and equity value?
✔✔ Enterprise value reflects the total value of the company including debt, while equity value
reflects only the value attributable to shareholders.
How is EBITDA calculated from the income statement?
✔✔ EBITDA = Operating Income + Depreciation + Amortization.
1
,What is the purpose of a sensitivity analysis in financial modeling?
✔✔ To assess how changes in key assumptions impact valuation or financial outcomes.
How do you calculate the weighted average cost of capital (WACC)?
✔✔ WACC = (E/V) × Re + (D/V) × Rd × (1 − Tax Rate), where E = equity, D = debt, V = E + D.
What is the primary use of a discounted cash flow (DCF) model?
✔✔ To estimate the intrinsic value of a company based on projected future cash flows
discounted at WACC.
How do you calculate net working capital (NWC)?
✔✔ NWC = Current Assets − Current Liabilities.
What is the difference between operating cash flow and free cash flow?
✔✔ Operating cash flow measures cash generated from core operations; free cash flow accounts
for capital expenditures and changes in working capital.
What is the formula for calculating terminal value using the perpetuity growth method?
2
, ✔✔ Terminal Value = Final Year Free Cash Flow × (1 + g) / (WACC − g), where g is the growth
rate.
How do you calculate the price-to-earnings (P/E) ratio?
✔✔ P/E Ratio = Market Price per Share / Earnings per Share.
What is the effect of issuing debt on a company’s WACC, assuming cost of debt is lower than
cost of equity?
✔✔ Issuing debt generally decreases WACC due to the lower after-tax cost of debt.
How do you calculate unlevered free cash flow?
✔✔ Unlevered FCF = EBIT × (1 − Tax Rate) + Depreciation & Amortization − Capital
Expenditures − Change in NWC.
What is the purpose of performing a comparable company analysis (comps)?
✔✔ To value a company based on valuation multiples of similar public companies.
How do you calculate levered beta for a company?
3
