BUSINESS FINANCE DCF MIDTERM - (30 QUESTIONS) UP-TO-DATE ACTUAL EXAM
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Candidate Name: ____________________________
Candidate ID: ________________________________
Date: _______________________________________
Examination Centre: __________________________
Instructions to Candidates:
You are required to answer all 30 questions in this Business Finance Discounted Cash
Flow (DCF) Midterm Examination. The exam assesses your ability to apply financial
valuation techniques, interpret cash flow projections, and critically evaluate investment
opportunities using DCF methodologies. You are allowed 90 minutes to complete this
examination. Calculators are permitted. All answers must be selected carefully, as no
penalties are applied for incorrect responses. Ensure all workings are conceptualized
even though only final answers are required.
Core Competency Areas:
, Time Value of Money
Free Cash Flow Estimation
Discount Rate (WACC) Calculation
Terminal Value Estimation
Sensitivity & Scenario Analysis
Valuation Interpretation
This assessment is an original simulation designed for academic preparation and is not
affiliated with or representative of any official examination body.
The purpose of this midterm is to evaluate your analytical proficiency in applying DCF
valuation in business finance contexts. You are expected to demonstrate strong
conceptual understanding, numerical accuracy, and decision-making ability under
realistic financial scenarios.
Q1. A firm projects free cash flows of $5M growing at 4% perpetually after year 5. If WACC
is 10%, what is the terminal value at year 5?
A. $83.3M
B. $86.7M
,C. $75.0M
D. $90.0M
Correct Answer: 🔴 B. $86.7M
Explanation: 🟡 Terminal Value = FCF₆ / (WACC – g) = 5×1.04 / (0.10–0.04) = 5..06 =
86.7M. A is incorrect due to ignoring growth. C underestimates. D overstates due to
miscalculation.
Q2. Which assumption most critically impacts DCF valuation sensitivity?
A. Historical revenue
B. Discount rate
C. Tax rate
D. Depreciation method
Correct Answer: 🔴 B. Discount rate
Explanation: 🟡 Small changes in WACC significantly alter valuation. A is backward-looking.
C and D have minor relative impact.
Q3. Free Cash Flow to Firm (FCFF) excludes which component?
A. EBIT
, B. Taxes
C. Interest payments
D. Capital expenditures
Correct Answer: 🔴 C. Interest payments
Explanation: 🟡 FCFF is pre-financing cash flow. A, B, D are included in FCFF calculation.
Q4. If WACC increases, the DCF valuation will:
A. Increase
B. Decrease
C. Remain unchanged
D. Become zero
Correct Answer: 🔴 B. Decrease
Explanation: 🟡 Higher discount rate reduces present value. A is incorrect. C unrealistic. D
only if WACC infinite.
Q5. Which is the correct FCFF formula?
A. Net Income + Interest
B. EBIT × (1–Tax) + Dep – CapEx – ΔWC
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Candidate Name: ____________________________
Candidate ID: ________________________________
Date: _______________________________________
Examination Centre: __________________________
Instructions to Candidates:
You are required to answer all 30 questions in this Business Finance Discounted Cash
Flow (DCF) Midterm Examination. The exam assesses your ability to apply financial
valuation techniques, interpret cash flow projections, and critically evaluate investment
opportunities using DCF methodologies. You are allowed 90 minutes to complete this
examination. Calculators are permitted. All answers must be selected carefully, as no
penalties are applied for incorrect responses. Ensure all workings are conceptualized
even though only final answers are required.
Core Competency Areas:
, Time Value of Money
Free Cash Flow Estimation
Discount Rate (WACC) Calculation
Terminal Value Estimation
Sensitivity & Scenario Analysis
Valuation Interpretation
This assessment is an original simulation designed for academic preparation and is not
affiliated with or representative of any official examination body.
The purpose of this midterm is to evaluate your analytical proficiency in applying DCF
valuation in business finance contexts. You are expected to demonstrate strong
conceptual understanding, numerical accuracy, and decision-making ability under
realistic financial scenarios.
Q1. A firm projects free cash flows of $5M growing at 4% perpetually after year 5. If WACC
is 10%, what is the terminal value at year 5?
A. $83.3M
B. $86.7M
,C. $75.0M
D. $90.0M
Correct Answer: 🔴 B. $86.7M
Explanation: 🟡 Terminal Value = FCF₆ / (WACC – g) = 5×1.04 / (0.10–0.04) = 5..06 =
86.7M. A is incorrect due to ignoring growth. C underestimates. D overstates due to
miscalculation.
Q2. Which assumption most critically impacts DCF valuation sensitivity?
A. Historical revenue
B. Discount rate
C. Tax rate
D. Depreciation method
Correct Answer: 🔴 B. Discount rate
Explanation: 🟡 Small changes in WACC significantly alter valuation. A is backward-looking.
C and D have minor relative impact.
Q3. Free Cash Flow to Firm (FCFF) excludes which component?
A. EBIT
, B. Taxes
C. Interest payments
D. Capital expenditures
Correct Answer: 🔴 C. Interest payments
Explanation: 🟡 FCFF is pre-financing cash flow. A, B, D are included in FCFF calculation.
Q4. If WACC increases, the DCF valuation will:
A. Increase
B. Decrease
C. Remain unchanged
D. Become zero
Correct Answer: 🔴 B. Decrease
Explanation: 🟡 Higher discount rate reduces present value. A is incorrect. C unrealistic. D
only if WACC infinite.
Q5. Which is the correct FCFF formula?
A. Net Income + Interest
B. EBIT × (1–Tax) + Dep – CapEx – ΔWC
