Question 1

All of the following are logical steps that enable the analyst to determine reliable estimates of value except:

Accepted Answer

A)   Understand the economics of the industry
B)   Assess the particular firm's strategy
C)   Evaluate the quality of the firm's accounting
D)   Derive a single point estimate of value for a share's current price D

Question 2

For most firms,______________________________ include cash and short-term investment securities,accounts receivable,inventory,property,plant and equipment,intangible assets and investments in affiliated companies.

Accepted Answer

operating assets

Question 3

Net cash flow from operations ________________ dividends equals_______________________

Accepted Answer

Capital expenditures,free cash flow

Question 4

The conceptual framework for free cash flows separates the balance sheet equation into the following categories:

Accepted Answer

A)   CA + LT A = CL + LT L + SE
B)   OA + FA = OL + FL + SE
C)   OA + FA = OL + FL + OSE + FSE
D)   Non-FA + FA = Non-FL + FL + SE

Question 5

The risk-adjusted discount rate used to compute the present value of all the projected free cash flows for common equity shareholders equals the _______________________________________________________.

Accepted Answer

The answer of The risk-adjusted discount rate used to compute...

Question 6

Morgan Company reported the following items in 2013:  Required:
Calculate the following:
(1)net cash provided by operating activities,
(2)the net change in cash during 2013,and
(3)free cash flow.

Accepted Answer

The answer of Morgan Company reported the following items in...

Question 7

The analyst can use expectations of the dividends to be paid to the investor or the free cash
flows to be generated by the firm (that will ultimately be paid to the investor)as equivalent
approaches to measure the ____________ expected payoffs to shareholders.

Accepted Answer

The answer of The analyst can use expectations of the...

Question 8

Even in relatively efficient securities markets,______ is observable but ______ is not;therefore,______ must be estimated.

Accepted Answer

The answer of Even in relatively efficient securities markets,______ is...

Question 9

Shady Sunglasses operates retail sunglass kiosks in shopping malls.Below is information related to the company:
  Using a five-year forecast horizon,compute the sum of the present value of free cash flows accruing to common equity holders for years 2012 to 2016.

Accepted Answer

The answer of Shady Sunglasses operates retail sunglass kiosks in...

Question 10

When calculating free cash flows to common equity shareholders,financing activities do not include:

Accepted Answer

A)   Debt cash flows
B)   Adjustments for capital expenditures
C)   Adjustments for Preferred stock cash flows
D)   Financial asset cash flows

Question 11

Steady-state growth in free cash flows could be driven by long-run expectations for growth attributable to:

Accepted Answer

A)   interest rates
B)   national exports
C)   general economic productivity
D)   balance of payments

Question 12

The cash-flow-based valuation approach measures and values the cash flows that are "free" to be ________________________________________ unencumbered by necessary reinvestments in operating assets or required payments to debt holders.

Accepted Answer

The answer of The cash-flow-based valuation approach measures and values...

Question 13

The forecasting and valuation process is particularly difficult for ______________________________ when the near term free cash flows tend to be negative.

Accepted Answer

The answer of The forecasting and valuation process is particularly...

Question 14

________________________________________ typically include accounts payable,accrued expenses,accrued taxes,deferred taxes,pension obligations and other retirement benefit obligations.

Accepted Answer

The answer of ________________________________________ typically include accounts payable,accrued expenses,accrued taxes,deferred...

Question 15

If the objective is to value operating assets net of operating liabilities of a firm then the appropriate free cash flow measure to be used is ______________________________________________________________________.

Accepted Answer

The answer of If the objective is to value operating...

Question 16

________________ is an estimate of systematic risk based on the degree of covariation between a firm's stock returns and an index of stock returns for all firms in the market.

Accepted Answer

The answer of ________________ is an estimate of systematic risk...

Question 17

Nonsystematic risk factors would include all of the following except:

Accepted Answer

A)   the sustainability of the firm's strategy
B)   the firm's ability to generate revenue growth
C)   the firm's ability to control expenses
D)   unemployment levels

Question 18

If a firm generates a rate of return on __________________________________________________ equal to the discount rate used by the investor then it does not matter if an analyst uses cash flows to the investor or cash flows to the firm.

Accepted Answer

The answer of If a firm generates a rate of...

Question 19

Plough Corporation reports the following information:  Plough's free cash flow is:

Accepted Answer

A)   $80,000
B)   $105,000
C)   $45,000
D)   $10,000

Question 20

Clarmont Corporation engaged in the following cash transactions during 2012:
  Required:
What is Clarmont's free cash flow,assuming that it reported net cash provided by operating activities of $650,000?

Accepted Answer

The answer of Clarmont Corporation engaged in the following cash...

Exam 12: Valuation: Cash-Flow-Based Approaches

All of the following are logical steps that enable the analyst to determine reliable estimates of value except:

For most firms,______________________________ include cash and short-term investment securities,accounts receivable,inventory,property,plant and equipment,intangible assets and investments in affiliated companies.

Net cash flow from operations dividends equals_______

The conceptual framework for free cash flows separates the balance sheet equation into the following categories:

The risk-adjusted discount rate used to compute the present value of all the projected free cash flows for common equity shareholders equals the _______________________________________________________.

Morgan Company reported the following items in 2013: Required: Calculate the following: (1)net cash provided by operating activities, (2)the net change in cash during 2013,and (3)free cash flow.

The analyst can use expectations of the dividends to be paid to the investor or the free cash flows to be generated by the firm (that will ultimately be paid to the investor)as equivalent approaches to measure the ____________ expected payoffs to shareholders.

Even in relatively efficient securities markets, is observable but is not;therefore,__ must be estimated.

Shady Sunglasses operates retail sunglass kiosks in shopping malls.Below is information related to the company: Using a five-year forecast horizon,compute the sum of the present value of free cash flows accruing to common equity holders for years 2012 to 2016.