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M&I 400 QUESTIONS – DCF 2026
LATEST QUESTIONS AND ANSWERS|
ACE YOUR GRADES.
What types of sensitivity analysis would we look at in a DCF? -
correct answer -EBITDA margin vs. Terminal Multiple
Terminal Multiple vs. Discount Rate
Long-Term Growth Rate vs. Discount Rate
(any of these except Terminal Multiple vs. Long-Term Growth
Rate)
A company has a high debt load and is paying off principle each
year. How do you account for this in DCF? - correct answer -You
don't -- paying off debt shows up in CFF, but we only go down to
CFO and then subtract CapEx to get FCF
If we were looking at levered cash flow, then our interest expense
would decline in future years due to principal being paid off (don't
count for principal payments themselves anywhere)
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Why use mid-year convention in DCF? - correct answer -
Because CF does not come in 100% at end of year (evenly
throughout year)
Without mid-year convention, would have discount period
numbers of 1 for first year, 2 for second year, and 3 for the third
year
Midyear conventions would give us .5 for first year 1.5 for 2nd
year and 2.5 for 3rd year and so on
What discount period numbers would I use in a mid-year
convention if I have a stub-period (Q4 of Year 1) in my DCF? -
correct answer -Divide stub period by 2 and subtract .5 from
"normal" discount periods of future years
Q4 - .25 Year 1 - 1.25 Year 2 - 2.25 etc
Q4 - .125 Year 1 - .75 Year 2 - 1.75
How does terminal value change when using a mid-year
convention? - correct answer -When discounting terminal value
back to present value, use different numbers for discount period
M&I 400 QUESTIONS – DCF 2026
LATEST QUESTIONS AND ANSWERS|
ACE YOUR GRADES.
What types of sensitivity analysis would we look at in a DCF? -
correct answer -EBITDA margin vs. Terminal Multiple
Terminal Multiple vs. Discount Rate
Long-Term Growth Rate vs. Discount Rate
(any of these except Terminal Multiple vs. Long-Term Growth
Rate)
A company has a high debt load and is paying off principle each
year. How do you account for this in DCF? - correct answer -You
don't -- paying off debt shows up in CFF, but we only go down to
CFO and then subtract CapEx to get FCF
If we were looking at levered cash flow, then our interest expense
would decline in future years due to principal being paid off (don't
count for principal payments themselves anywhere)
, Page | 2
Why use mid-year convention in DCF? - correct answer -
Because CF does not come in 100% at end of year (evenly
throughout year)
Without mid-year convention, would have discount period
numbers of 1 for first year, 2 for second year, and 3 for the third
year
Midyear conventions would give us .5 for first year 1.5 for 2nd
year and 2.5 for 3rd year and so on
What discount period numbers would I use in a mid-year
convention if I have a stub-period (Q4 of Year 1) in my DCF? -
correct answer -Divide stub period by 2 and subtract .5 from
"normal" discount periods of future years
Q4 - .25 Year 1 - 1.25 Year 2 - 2.25 etc
Q4 - .125 Year 1 - .75 Year 2 - 1.75
How does terminal value change when using a mid-year
convention? - correct answer -When discounting terminal value
back to present value, use different numbers for discount period
