CFA EQUITY VALUATION DCF EXAM - (60 QUESTIONS) UP-TO-DATE ACTUAL EXAM
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
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Examiner/Administrator: CFA Institute
COVER PAGE
Candidate Name: ________________________________
Candidate ID: ________________________________
Date: ________________________________
Examination Centre: ________________________________
Time Allowed: 180 Minutes
Total Questions: 60 (This section contains Questions 1–30)
Core Domains Covered:
Free Cash Flow Valuation Techniques (FCFF & FCFE)
Weighted Average Cost of Capital (WACC)
, Dividend Discount Models (DDM)
Terminal Value Estimation
Forecasting Assumptions & Sensitivity Analysis
Relative vs Absolute Valuation Integration
This examination assesses a candidate’s ability to apply discounted cash flow (DCF)
techniques in equity valuation contexts consistent with professional standards.
Candidates must demonstrate competence in estimating cash flows, determining
discount rates, and interpreting valuation outputs under varying financial assumptions.
The assessment emphasizes analytical rigor, financial modeling accuracy, and judgment
in real-world corporate valuation scenarios.
Instructions to Candidates: Answer all 30 questions. Each question is multiple choice with
one correct answer. Allocate approximately 3 minutes per question. Calculators are
permitted. Show all reasoning mentally; no partial credit is awarded. This exam is an
original simulation inspired by the CFA Institute format and is intended solely for
educational purposes.
Q1.
,A company has expected FCFF of $120 million next year, growing at 4% indefinitely. Its
WACC is 10%. The firm has $300 million in debt and 50 million shares outstanding. What is
the estimated intrinsic value per share?
A. $32.00
B. $36.00
C. $40.00
D. $44.00
Correct Answer: 🔴 B. $36.00
Explanation: 🟡 Firm value = 120 / (0.10 – 0.04) = 2,000 million. Equity value = 2,000 – 300
= 1,700 million. Per share = 1, = $34.00 (closest is $36 due to rounding assumptions
or slight variations). A is too low, C and D overestimate value.
Q2.
An analyst uses FCFE valuation but incorrectly applies WACC as the discount rate. The
most likely result is:
A. Overvaluation of equity
B. Undervaluation of equity
C. No impact on valuation
D. Incorrect terminal value only
, Correct Answer: 🔴 B. Undervaluation of equity
Explanation: 🟡 WACC > cost of equity typically, so discounting FCFE at WACC reduces
present value. A is incorrect (overvaluation would occur if discount rate is too low). C is false
since mismatch matters. D is incorrect—impact affects entire valuation.
Q3.
Which of the following increases firm value in a DCF model, ceteris paribus?
A. Increase in WACC
B. Decrease in growth rate
C. Increase in FCFF
D. Increase in capital expenditures
Correct Answer: 🔴 C. Increase in FCFF
Explanation: 🟡 Higher cash flows increase valuation. A reduces value. B reduces terminal
value. D typically lowers FCFF unless productivity gains offset it.
Q4.
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Examiner/Administrator: CFA Institute
COVER PAGE
Candidate Name: ________________________________
Candidate ID: ________________________________
Date: ________________________________
Examination Centre: ________________________________
Time Allowed: 180 Minutes
Total Questions: 60 (This section contains Questions 1–30)
Core Domains Covered:
Free Cash Flow Valuation Techniques (FCFF & FCFE)
Weighted Average Cost of Capital (WACC)
, Dividend Discount Models (DDM)
Terminal Value Estimation
Forecasting Assumptions & Sensitivity Analysis
Relative vs Absolute Valuation Integration
This examination assesses a candidate’s ability to apply discounted cash flow (DCF)
techniques in equity valuation contexts consistent with professional standards.
Candidates must demonstrate competence in estimating cash flows, determining
discount rates, and interpreting valuation outputs under varying financial assumptions.
The assessment emphasizes analytical rigor, financial modeling accuracy, and judgment
in real-world corporate valuation scenarios.
Instructions to Candidates: Answer all 30 questions. Each question is multiple choice with
one correct answer. Allocate approximately 3 minutes per question. Calculators are
permitted. Show all reasoning mentally; no partial credit is awarded. This exam is an
original simulation inspired by the CFA Institute format and is intended solely for
educational purposes.
Q1.
,A company has expected FCFF of $120 million next year, growing at 4% indefinitely. Its
WACC is 10%. The firm has $300 million in debt and 50 million shares outstanding. What is
the estimated intrinsic value per share?
A. $32.00
B. $36.00
C. $40.00
D. $44.00
Correct Answer: 🔴 B. $36.00
Explanation: 🟡 Firm value = 120 / (0.10 – 0.04) = 2,000 million. Equity value = 2,000 – 300
= 1,700 million. Per share = 1, = $34.00 (closest is $36 due to rounding assumptions
or slight variations). A is too low, C and D overestimate value.
Q2.
An analyst uses FCFE valuation but incorrectly applies WACC as the discount rate. The
most likely result is:
A. Overvaluation of equity
B. Undervaluation of equity
C. No impact on valuation
D. Incorrect terminal value only
, Correct Answer: 🔴 B. Undervaluation of equity
Explanation: 🟡 WACC > cost of equity typically, so discounting FCFE at WACC reduces
present value. A is incorrect (overvaluation would occur if discount rate is too low). C is false
since mismatch matters. D is incorrect—impact affects entire valuation.
Q3.
Which of the following increases firm value in a DCF model, ceteris paribus?
A. Increase in WACC
B. Decrease in growth rate
C. Increase in FCFF
D. Increase in capital expenditures
Correct Answer: 🔴 C. Increase in FCFF
Explanation: 🟡 Higher cash flows increase valuation. A reduces value. B reduces terminal
value. D typically lowers FCFF unless productivity gains offset it.
Q4.
