Question 1

A firm has $80 million in equity and $40 million of debt,it pays dividends of 20% of net income,and has a net income of $10 million.What is the firm's sustainable growth rate?

Accepted Answer

A) 7% 
B) 8% 
C) 9% 
D) 10% 
E) 11%

Question 2

Is total net working capital or incremental net working capital more relevant for calculation of free cash flow?

Accepted Answer

The answer of Is total net working capital or incremental...

Question 3

Why is EBITDA multiple used for valuation rather than sales or earnings?

Accepted Answer

The answer of Why is EBITDA multiple used for valuation...

Question 4

With the proper changes it is believed that Ideko's credit policies will allow for an account receivables days of 60.The forecasted accounts receivable for Ideko in 2016 is closest to:

Accepted Answer

A) $14,525 
B) $16,970 
C) $22,710 
D) $19,690 
E) $23,548

Question 5

Given the following data for a given period,compute the free cash flow to the firm: Net Income = $5000
After-tax Interest Expense = $500
Depreciation = $500
Increase in NWC = $1000
Capital Expenditures = $2000

Accepted Answer

A) $3000 
B) $3500 
C) $3700 
D) $3900 
E) $4200

Question 6

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko,2010-2015
  Pro Forma Balance Sheet for Ideko,2010-2015
 
-Assuming that Ideko has a EBITDA multiple of 8.5,then the continuation EV/Sales ratio of Ideko in 2015 is closest to:

Accepted Answer

A) 1.7 
B) 1.9 
C) 1.6 
D) 1.8 
E) 2.0

Question 7

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

Question 8

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko,2010-2015
  Pro Forma Balance Sheet for Ideko,2010-2015
 
-Assuming that Ideko has a EBITDA multiple of 9.4,then the continuation EV/Sales ratio of Ideko in 2015 is closest to:

Accepted Answer

A) 1.9 
B) 1.7 
C) 1.6 
D) 1.8 
E) 1.5

Question 9

Net new financing that we need to equate the assets and liabilities is also called the "plug."

Accepted Answer

A) True 
 B)False

Question 10

LG Inc.has done a long-term forecast of its balance sheet.The projected total assets for the next year are $100 million.The current liabilities are projected to be $40 million and other long-term liabilities are $30 million.How much net new financing is needed in the following year?

Accepted Answer

A) $18 million 
B) $22 million 
C) $25 million 
D) $30 million 
E) $10 million

Question 11

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

Question 12

The market size for Loppins is 60 million units.If SPI Inc.has a market share of 20% and the average sales price is $3 per Loppin,what is the dollar amount of sales of SPI?

Accepted Answer

A) $32 million 
B) $36 million 
C) $38 million 
D) $42 million 
E) $44 million

Question 13

A firm forecasts its free cash flow will be $100,000 one year from today.Free cash flows are expected to grow at 4% for the following 4 years.At the forecast horizon,the firm's growth results in an EBITDA forecast of $650,000.If its EBITDA multiple is 11 and the discount rate is 6%,what is the value of the firm?

Accepted Answer

A) $6.6 million 
B) $5 million 
C) $5.8 million 
D) $5.3 million 
E) $4.9 million

Question 14

A firm has ROA of 20%,ROE of 25%,and a payout ratio of 30%.What is the firm's internal growth rate?

Accepted Answer

A) 5% 
B) 14% 
C) 17.5% 
D) 6% 
E) 7.5%

Question 15

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

Question 16

When making long-term plans,any increases in ________ and ________ reflect capital structure decisions that require managers to actively raise capital.

Accepted Answer

A) debt,equity 
B) debt,assets 
C) assets,equity 
D) current ratio,equity 
E) debt,current ratio

Question 17

The amount of dividends a company pays will affect the ________ it has to finance future growth.

Accepted Answer

A) debt 
B) retained earnings 
C) current liabilities 
D) current ratio 
E) inventories

Question 18

A firm has $40 million in equity and $20 million of debt,it pays dividends of 20% of net income,and has a net income of $10 million.What is the firm's internal growth rate?

Accepted Answer

A) 12.2% 
B) 13.3% 
C) 14.1% 
D) 15.2% 
E) 15.7%

Question 19

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

Question 20

Compute the value of a firm with free cash flows of $1000,$2500,and $3000 over the next three years,a terminal firm value of $40,000 after three years,and the unlevered cost of capital is 15%.Assume that the interest rate tax shield is zero.

Accepted Answer

A) $26,191 
B) $27,234 
C) $31,033 
D) $39,343 
E) $44,926

Exam 18: Financial Modelling and Pro Forma Analysis