Wall Street Prep Premium Exam: Transaction Comps Modelling Wall
Street Prep Exam 50 questions and 100% correct answers with
complete solutions.
What is generally not considered to be a pre-tax non-recurring (unusual or
infrequent) item? - ANSWER: Extraordinary gains/losses
what is false about depreciation and amortization - ANSWER: D&A may be
classified within interest expense
Company X's current assets increased by $40 million from 2007-2008 while the
companies current liabilities increased by $25 million over the same period. the
cash impact of the change in working capital was - ANSWER: a decrease of 15
million
the final component of an earnings projection model is calculating interest expense.
the calculation may create a circular reference because - ANSWER: interest
expense affects net income, which affects FCF, which affects the amount of debt a
company pays down, which, in turn affects the interest expense, hence the circular
reference
a 10-q financial filing has all of the following characteristics except - ANSWER:
issued four times a year.
Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to which of the following -
ANSWER: computers used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%, and
projected SG&A expenses of $2billion, what is the company's operating (EBIT)
margin? - ANSWER: 45%
A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million, what
are the days sales outstanding - ANSWER: 36.5
A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
• 2014 Accounts receivable of $600 million
• 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
• 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What are the inventory days for the company? - ANSWER: 65.7 days
, Which of the following is true - ANSWER: Coca Cola's brand name is not reflected
as an intangible asset on its balance sheet
A company has the following information:
• 2014 share repurchase plan of $4 billion
• Average share price of $60 for the year 2013
• Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your financial
model? - ANSWER: 60.6 million
non-controlling interest - ANSWER: is an expense on the income statement and
equity o the balance sheet
A company has the following information:
• 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
• Capex of $200 million in 2014
• Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
What is the retained earnings balance at the end of 2014? - ANSWER: 15 billion
in order to find out how much cash is available to pay down short term debt, such
as revolving credit line, you must take - ANSWER: beginning cash balance + pre-
debt cash flows - min. cash balance - required principal payments of LT and other
debt
to calculate interest expense in the future, you should do which of the following -
ANSWER: apply a weighted average interest rate times the average debt balance
over the course of the year
enterprise (transaction) value represents the: - ANSWER: value of all capital
invested in a business
A debt holder would be primarily concerned with which of the following multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - ANSWER: 1 and 3 only
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million
shares outstanding. The company has net debt of $300 million. After building an
earnings model for Company X, you have projected free cash flow for each year
through 2020 as follows:
Year 2014 2015 2016 2017 2018 2019 2020
Free Cash Flow 110 120 150 170 200 250 280
You estimate that the weighted average cost of capital (WACC) for Company X is 10%
and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020,
Street Prep Exam 50 questions and 100% correct answers with
complete solutions.
What is generally not considered to be a pre-tax non-recurring (unusual or
infrequent) item? - ANSWER: Extraordinary gains/losses
what is false about depreciation and amortization - ANSWER: D&A may be
classified within interest expense
Company X's current assets increased by $40 million from 2007-2008 while the
companies current liabilities increased by $25 million over the same period. the
cash impact of the change in working capital was - ANSWER: a decrease of 15
million
the final component of an earnings projection model is calculating interest expense.
the calculation may create a circular reference because - ANSWER: interest
expense affects net income, which affects FCF, which affects the amount of debt a
company pays down, which, in turn affects the interest expense, hence the circular
reference
a 10-q financial filing has all of the following characteristics except - ANSWER:
issued four times a year.
Depreciation Expense found in the SG&A line of the income statement for a
manufacturing firm would most likely be attributable to which of the following -
ANSWER: computers used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of 65%, and
projected SG&A expenses of $2billion, what is the company's operating (EBIT)
margin? - ANSWER: 45%
A company has the following information, 1. 2014 revenues of $5 billion,2013
Accounts receivable of $400 million, 2014 accounts receivable of $600 million, what
are the days sales outstanding - ANSWER: 36.5
A company has the following information:
• 2014 Revenues of $8 billion
• 2014 COGS of $5 billion
• 2013 Accounts receivable of $400 million
• 2014 Accounts receivable of $600 million
• 2013 Inventories of $1 billion
• 2014 Inventories of $800 million
• 2013 Accounts payable of $250 million
• 2014 Accounts payable of $300 million
What are the inventory days for the company? - ANSWER: 65.7 days
, Which of the following is true - ANSWER: Coca Cola's brand name is not reflected
as an intangible asset on its balance sheet
A company has the following information:
• 2014 share repurchase plan of $4 billion
• Average share price of $60 for the year 2013
• Expected EPS growth for 2014 of 10%
What should the number of shares repurchased by the company be in your financial
model? - ANSWER: 60.6 million
non-controlling interest - ANSWER: is an expense on the income statement and
equity o the balance sheet
A company has the following information:
• 2013 retained earnings balance of $12 billion
• Net income of $3.5 billion in 2014
• Capex of $200 million in 2014
• Preferred dividends of $100 million in 2014
• Common dividends of $400 million in 2014
What is the retained earnings balance at the end of 2014? - ANSWER: 15 billion
in order to find out how much cash is available to pay down short term debt, such
as revolving credit line, you must take - ANSWER: beginning cash balance + pre-
debt cash flows - min. cash balance - required principal payments of LT and other
debt
to calculate interest expense in the future, you should do which of the following -
ANSWER: apply a weighted average interest rate times the average debt balance
over the course of the year
enterprise (transaction) value represents the: - ANSWER: value of all capital
invested in a business
A debt holder would be primarily concerned with which of the following multiples?
I. Enterprise (Transaction) Value / EBITDA
II. Price/Earnings
III. Enterprise (Transaction) Value / Sales - ANSWER: 1 and 3 only
On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million
shares outstanding. The company has net debt of $300 million. After building an
earnings model for Company X, you have projected free cash flow for each year
through 2020 as follows:
Year 2014 2015 2016 2017 2018 2019 2020
Free Cash Flow 110 120 150 170 200 250 280
You estimate that the weighted average cost of capital (WACC) for Company X is 10%
and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020,
