Wall Street Prep
Premium
Exam:Transactio
n Comps
Modeling Wall
Street Prep Exam
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 2014 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,
the final projected year.
According to the discounted cash flow valuation method,
Company X shares are: - ANS-.13 per share overvalued
what is false about depreciation and amortization - ANS-
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 - ANS-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 - ANS-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 - ANS-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 - ANS-
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? - ANS-45%
Premium
Exam:Transactio
n Comps
Modeling Wall
Street Prep Exam
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 2014 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,
the final projected year.
According to the discounted cash flow valuation method,
Company X shares are: - ANS-.13 per share overvalued
what is false about depreciation and amortization - ANS-
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 - ANS-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 - ANS-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 - ANS-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 - ANS-
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? - ANS-45%
