Question 1

The estimate of a firm's value at the end of the forecast horizon using a valuation multiple is also called its

Accepted Answer

A)  fixed value. 
B)  payback value. 
C)  terminal value. 
D)  future value. 
E)  intrinsic value. 
A)  fixed value. 
B)  payback value. 
C)  terminal value. 
D)  future value. 
E)  intrinsic value.

Question 2

Building a model for long-term forecasting reveals points in the future where the firm will need ________ when retained earnings are not enough to fund planned future investments.

Accepted Answer

A)  external financing 
B)  stock dividends 
C)  dividend payments 
D)  mergers 
E)  large cash reserves 
A)  external financing 
B)  stock dividends 
C)  dividend payments 
D)  mergers 
E)  large cash reserves

Question 3

Using the percent of sales method,and assuming 20% growth in sales,estimate Billy's Burgers' accounts receivable for 2016.

Accepted Answer

A)  $21.0 million 
B)  $25.2 million 
C)  $18.0 million 
D)  $21.6 million 
E)  $19.5 million 
A)  $21.0 million 
B)  $25.2 million 
C)  $18.0 million 
D)  $21.6 million 
E)  $19.5 million

Question 4

Use the table for the question(s) below.
Ideko Sales and Operating Cost Assumptions
  
-Based upon Ideko's sales and operating cost assumptions,what production capacity will Ideko require in 2018?

Accepted Answer

A)  1505 units 
B)  1115 units 
C)  1323 units 
D)  1702 units 
E)  1914 units 
A)  1505 units 
B)  1115 units 
C)  1323 units 
D)  1702 units 
E)  1914 units

Question 5

Assuming that Ideko has a EBITDA multiple of 8.5,then the continuation enterprise value of Ideko in 2015 is closest to:

Accepted Answer

A)  $152.8 million 
B)  $272.8 million 
C)  $301.7 million 
D)  $181.7 million 
E)  $147.1 million 
A)  $152.8 million 
B)  $272.8 million 
C)  $301.7 million 
D)  $181.7 million 
E)  $147.1 million

Question 6

Kendo Corp.is projecting sales of $15 million in the coming year.If the size of the market is $50 million,and Kendo's projected market share is 25%,what is the average sale price of its products?

Accepted Answer

A)  $0.60 
B)  $0.83 
C)  $1.00 
D)  $1.20 
E)  $1.85 
A)  $0.60 
B)  $0.83 
C)  $1.00 
D)  $1.20 
E)  $1.85

Question 7

What is the free cash flow to equity holders for a firm with free cash flow of $11,000,after-tax interest expense of $2000,and an increase in debt of $2000?

Accepted Answer

A)  $7000 
B)  $8000 
C)  $9000 
D)  $11,000 
E)  $12,000 
A)  $7000 
B)  $8000 
C)  $9000 
D)  $11,000 
E)  $12,000

Question 8

A firm has $50 million in equity and $20 million in debt,has net income of $10 million and an internal growth rate of 6%.What is the firm's payout ratio?

Accepted Answer

A)  58% 
B)  42% 
C)  18% 
D)  82% 
E)  20% 
A)  58% 
B)  42% 
C)  18% 
D)  82% 
E)  20%

Question 9

Given the following data for a given period,compute the free cash flow to the firm: Net Income = $12,000
After-tax Interest Expense = $2000
Depreciation = $1000
Increase in NWC = $2000
Capital Expenditures = $1000

Accepted Answer

A)  $10,000 
B)  $11,000 
C)  $12,000 
D)  $13,000 
E)  $14,000 
A)  $10,000 
B)  $11,000 
C)  $12,000 
D)  $13,000 
E)  $14,000

Question 10

Compute the value of a firm with free cash flows of $9000,$7000,and $5000 over the next three years,a terminal firm value of $30,000 after three years,and the unlevered cost of capital is 10%.Assume that the interest rate tax shield is zero.

Accepted Answer

A)  $36,109 
B)  $37,098 
C)  $38,745 
D)  $40,263 
E)  $42,772 
A)  $36,109 
B)  $37,098 
C)  $38,745 
D)  $40,263 
E)  $42,772

Question 11

A firm has interest expense of $6500 each year for ten years.If the tax rate is 35% and the discount rate is 6%,compute the value of the interest rate tax shield.

Accepted Answer

A)  $16,744 
B)  $16,424 
C)  $16,578 
D)  $16,987 
E)  $17,219 
A)  $16,744 
B)  $16,424 
C)  $16,578 
D)  $16,987 
E)  $17,219

Question 12

Use the table for the question(s) below.
Pro Forma Income Statement for Ideko, 2014-2019
  
-The amount of the increase in net working capital for Ideko in 2017 is closest to:

Accepted Answer

A)  $4685 
B)  $3665 
C)  $4090 
D)  $5230 
E)  $5750 
A)  $4685 
B)  $3665 
C)  $4090 
D)  $5230 
E)  $5750

Question 13

Pledrea Inc.has EBITDA at the forecast horizon of $13,000.Its EBITDA multiple is 10.What is the terminal value of the firm at the forecast horizon?

Accepted Answer

A)  $100,000 
B)  $110,000 
C)  $120,000 
D)  $130,000 
E)  $140,000 
A)  $100,000 
B)  $110,000 
C)  $120,000 
D)  $130,000 
E)  $140,000

Question 14

A firm has an EBITDA forecast of $150,000 in 5 years.If its EBITDA multiple is 9 and the discount rate is 5%,what is the PV of the firm's terminal value?

Accepted Answer

A)  $1.06 million 
B)  $1.35 million 
C)  $1.15 million 
D)  $150,000 
E)  $117,530 
A)  $1.06 million 
B)  $1.35 million 
C)  $1.15 million 
D)  $150,000 
E)  $117,530

Question 15

LG Inc.has done a long-term forecast of its balance sheet.The projected total assets for the next year are $300 million.The current liabilities are projected to be $170 million and other long-term liabilities are $70 million.How much net new financing is needed in the following year?

Accepted Answer

A)  $58 million 
B)  $60 million 
C)  $65 million 
D)  $70 million 
E)  $75 million 
A)  $58 million 
B)  $60 million 
C)  $65 million 
D)  $70 million 
E)  $75 million

Question 16

A services firm does all its business in cash only.The firm projects a cash balance of of $3000 in its account after all taxes and costs are paid.The owners plan to invest $8000 and pay a dividend of $1000.How much net new financing is needed?

Accepted Answer

A)  $4000 
B)  $5000 
C)  $6000 
D)  $7000 
E)  $8000 
A)  $4000 
B)  $5000 
C)  $6000 
D)  $7000 
E)  $8000

Question 17

Use the table for the question(s) below.
Pro Forma Income Statement for Ideko, 2014-2019
  
-Internal growth rate assumes that the firm can finance investments via sale of debt.

Accepted Answer

A) True 
 B)False

Question 18

Long-term financial planning helps a financial manager in budgeting but has little to do with understanding how the business operates.

Accepted Answer

A) True 
 B)False

Question 19

Granger Inc.has done a long-term forecast of its balance sheet.Total assets are projected to be $1.5 million and current liabilities are projected to be $750,000.If the firm expects to need $500,000 in net new financing,what are the projected long-term liabilities?

Accepted Answer

A)  $650,000 
B)  $1,250,000 
C)  $350,000 
D)  $450,000 
E)  $250,000 
A)  $650,000 
B)  $1,250,000 
C)  $350,000 
D)  $450,000 
E)  $250,000

Question 20

Use the table for the question(s) below.
Ideko Sales and Operating Cost Assumptions
  
-Based upon Ideko's sales and operating cost assumptions,what production capacity will Ideko require in 2017?

Accepted Answer

A)  1702 units 
B)  1323 units 
C)  1505 units 
D)  1914 units 
E)  1115 units 
A)  1702 units 
B)  1323 units 
C)  1505 units 
D)  1914 units 
E)  1115 units

Exam 18: Financial Modelling and Pro Forma Analysis

The estimate of a firm's value at the end of the forecast horizon using a valuation multiple is also called its

Building a model for long-term forecasting reveals points in the future where the firm will need ________ when retained earnings are not enough to fund planned future investments.

Using the percent of sales method,and assuming 20% growth in sales,estimate Billy's Burgers' accounts receivable for 2016.

Use the table for the question(s) below. Ideko Sales and Operating Cost Assumptions -Based upon Ideko's sales and operating cost assumptions,what production capacity will Ideko require in 2018?

Assuming that Ideko has a EBITDA multiple of 8.5,then the continuation enterprise value of Ideko in 2015 is closest to:

Kendo Corp.is projecting sales of $15 million in the coming year.If the size of the market is $50 million,and Kendo's projected market share is 25%,what is the average sale price of its products?

What is the free cash flow to equity holders for a firm with free cash flow of $11,000,after-tax interest expense of $2000,and an increase in debt of $2000?

A firm has $50 million in equity and $20 million in debt,has net income of $10 million and an internal growth rate of 6%.What is the firm's payout ratio?

Given the following data for a given period,compute the free cash flow to the firm: Net Income = $12,000 After-tax Interest Expense = $2000 Depreciation = $1000 Increase in NWC = $2000 Capital Expenditures = $1000

Compute the value of a firm with free cash flows of $9000,$7000,and $5000 over the next three years,a terminal firm value of $30,000 after three years,and the unlevered cost of capital is 10%.Assume that the interest rate tax shield is zero.

A firm has interest expense of $6500 each year for ten years.If the tax rate is 35% and the discount rate is 6%,compute the value of the interest rate tax shield.

Use the table for the question(s) below. Pro Forma Income Statement for Ideko, 2014-2019 -The amount of the increase in net working capital for Ideko in 2017 is closest to:

Pledrea Inc.has EBITDA at the forecast horizon of $13,000.Its EBITDA multiple is 10.What is the terminal value of the firm at the forecast horizon?

A firm has an EBITDA forecast of $150,000 in 5 years.If its EBITDA multiple is 9 and the discount rate is 5%,what is the PV of the firm's terminal value?

LG Inc.has done a long-term forecast of its balance sheet.The projected total assets for the next year are $300 million.The current liabilities are projected to be $170 million and other long-term liabilities are $70 million.How much net new financing is needed in the following year?

A services firm does all its business in cash only.The firm projects a cash balance of of $3000 in its account after all taxes and costs are paid.The owners plan to invest $8000 and pay a dividend of $1000.How much net new financing is needed?

Use the table for the question(s) below. Pro Forma Income Statement for Ideko, 2014-2019 -Internal growth rate assumes that the firm can finance investments via sale of debt.

Long-term financial planning helps a financial manager in budgeting but has little to do with understanding how the business operates.

Granger Inc.has done a long-term forecast of its balance sheet.Total assets are projected to be $1.5 million and current liabilities are projected to be $750,000.If the firm expects to need $500,000 in net new financing,what are the projected long-term liabilities?

Use the table for the question(s) below. Ideko Sales and Operating Cost Assumptions -Based upon Ideko's sales and operating cost assumptions,what production capacity will Ideko require in 2017?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Valuation Principle: the Foundation of Financial Decision Making

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Working Capital Management

Short Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

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