Financial Modelling And Valuation Test Part 2

Quiz Questions

• 1.
  Q1. Which of the following historical financial data points is the least useful for framing projections and performing LBO analysis in the present time frame?

  • A.
    A. Interest expense
  • B.
    B. EBITDA and EBIT margins
  • C.
    C. Capex
• 2.
  Q2. A company with no debt in its capital structure would have a WACC equal to its

  • A.
    A. Cost of Equity
  • B.
    B. Cost of Debt
  • C.
    C. Tax-effected cost of equity
• 3.
  Q3. Which of these factors can causes the cost of debt to be tax-affected?

  • A.
    A. Debt principal is tax deductible.
  • B.
    B. Interest expense is tax deductible.
  • C.
    C. It should not be tax-affected since equity is not tax-affected.
• 4.
  Q4. What does days payable outstanding measure?

  • A.
    A. Number of days it takes a company to make payment on outstanding purchases of goods and services
  • B.
    B. Number of days it takes a company to collect payment after sale of a product or service
  • C.
    C. Number of days it takes a company to make payment on outstanding fixed expenses
• 5.
  Q5. The period of a bridge loan is typically

  • A.
    A. 1 year
  • B.
    B. 2 years
  • C.
    C. 3 years
• 6.
  Q6.What is the process by which goodwill is generated?

  • A.
    A. The amount of money paid for each share of a company's stock.
  • B.
    B. Synergies generated as a result of a merger and acquisition transaction
  • C.
    C. The excess of the purchase price paid for a target over the target's net identifiable assets
• 7.
  Q7. What is the typical process for developing capital expenditure projections?

  • A.
    A. This information was obtained from the CIM.
  • B.
    B. Analysis of comparable companies
  • C.
    C. In-depth inventory inspection
• 8.
  Q8. What is the most common assumption made in LBO analysis when it comes to the exit multiple, and why?

  • A.
    A. Make the number equal to, or lower than, the entry multiple.
  • B.
    B. Increase the entry multiple by a factor greater than one.
  • C.
    C. Set the bar higher than the nearest competitor.
• 9.
  Q9.An accretion/(dilution) analysis is typically performed by ?

  • A.
    A. Public strategic buyers
  • B.
    B. Sponsor buyers
  • C.
    C. Non-public foreign buyers
• 10.
  Q.10 What is Debt financing fees in an M&A deal are?

  • A.
    A. Expensed immediately
  • B.
    B. Capitalized
  • C.
    C. Written off
• 11.
  Q.11 Why is a deferred tax liability created?

  • A.
    A.Tax depreciation of step-up assets is calculated on a tax basis rather than on a GAAP book basis.
  • B.
    B.In accordance with GAAP accounting principles, stepped-up assets are depreciated on a book basis, but are not depreciated for tax purposes.
  • C.
    C.On a GAAP book basis, stepped-up assets depreciate more quickly than they do for tax purposes.
• 12.
  Q.12 Under normal market conditions, which of the following is a reasonable total leverage ratio for an LBO?

  • A.
    A. 3.0x EBITDA
  • B.
    B. 5.0x EBITDA
  • C.
    C. 5.0x net income
• 13.
  Q.13 What is the current yield of a $1,000 bond (face value) with a coupon of 6.0% that is trading at par?

  • A.
    A. 5.9%
  • B.
    B. 6.0%
  • C.
    C. 6.6%
• 14.
  Q.14 Which methodology is used to capture a company's value beyond its forecast period?

  • A.
    A. Long-term value
  • B.
    B. Terminal value
  • C.
    C. Projected value
• 15.
  Q15- How does using a mid-year convention affect valuation in a DCF?

  • A.
    A. Higher value than year-end discounting
  • B.
    B. Lower value than year-end discounting
  • C.
    C. Same value as year-end discounting

Quiz Outcomes

• 1.
  Result 1

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