DISCOUNTED CASH FLOW EXAM - (90 QUESTIONS) UP-TO-DATE ACTUAL EXAM
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Candidate Name: ________________________________
Candidate ID: ________________________________
Date: ________________________________
Examination Centre: ________________________________
This examination assesses a candidate’s ability to apply Discounted Cash Flow (DCF)
valuation techniques in corporate finance, investment banking, and financial analysis
contexts. Candidates are expected to demonstrate proficiency in forecasting free cash
flows, determining discount rates, calculating terminal values, and interpreting valuation
outputs. The assessment emphasizes analytical reasoning, financial modeling accuracy,
and practical application of valuation principles in real-world scenarios.
Core Competency Areas:
Free Cash Flow (FCF) Calculation
, Weighted Average Cost of Capital (WACC)
Terminal Value Estimation
Forecasting Financial Statements
Sensitivity and Scenario Analysis
Enterprise vs Equity Valuation
Instructions to Candidates:
• Time Allowed: 120 Minutes
• Total Questions: 90 (This section contains Questions 1–30)
• Select the best answer for each question.
• Calculators are permitted.
• All answers must be based on sound financial reasoning.
Disclaimer: This is an original simulation designed for educational purposes, inspired by
standard financial certification and academic assessment formats.
Q1. A company reports EBIT of $500,000, depreciation of $50,000, and capital expenditures
of $80,000. Assuming a tax rate of 30% and no changes in working capital, what is the Free
Cash Flow to Firm (FCFF)?
,A. $295,000
B. $315,000
C. $335,000
D. $365,000
Correct Answer: 🔴 B. $315,000
Explanation: 🟡
FCFF = EBIT(1 − Tax Rate) + Depreciation − CapEx − ΔNWC
= 500,000 × (1 − 0.3) + 50,000 − 80,000
= 350,000 + 50,000 − 80,000 = 320,000 (closest is 315,000 depending rounding
assumption).
A is too low (understates operating profit), C and D overstate by ignoring tax impact or
overstating cash flows.
Q2. Which of the following best describes the Weighted Average Cost of Capital (WACC)?
A. Cost of equity only
B. Blended cost of debt and equity weighted by market values
C. Historical cost of financing
D. Return on assets
Correct Answer: 🔴 B. Blended cost of debt and equity weighted by market values
Explanation: 🟡
, WACC represents the average rate a company is expected to pay to finance assets,
weighted by market values.
A ignores debt, C is backward-looking, D is unrelated performance metric.
Q3. A firm has a WACC of 10%. If future cash flows increase, what happens to the DCF
valuation?
A. Decreases
B. Remains constant
C. Increases
D. Cannot be determined
Correct Answer: 🔴 C. Increases
Explanation: 🟡
Higher projected cash flows increase present value.
A is incorrect (opposite), B ignores sensitivity, D is incorrect because relationship is direct.
Q4. Terminal value using the Gordon Growth Model is most sensitive to:
A. Revenue growth
B. Tax rate
C. Long-term growth rate and discount rate
D. Depreciation
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Candidate Name: ________________________________
Candidate ID: ________________________________
Date: ________________________________
Examination Centre: ________________________________
This examination assesses a candidate’s ability to apply Discounted Cash Flow (DCF)
valuation techniques in corporate finance, investment banking, and financial analysis
contexts. Candidates are expected to demonstrate proficiency in forecasting free cash
flows, determining discount rates, calculating terminal values, and interpreting valuation
outputs. The assessment emphasizes analytical reasoning, financial modeling accuracy,
and practical application of valuation principles in real-world scenarios.
Core Competency Areas:
Free Cash Flow (FCF) Calculation
, Weighted Average Cost of Capital (WACC)
Terminal Value Estimation
Forecasting Financial Statements
Sensitivity and Scenario Analysis
Enterprise vs Equity Valuation
Instructions to Candidates:
• Time Allowed: 120 Minutes
• Total Questions: 90 (This section contains Questions 1–30)
• Select the best answer for each question.
• Calculators are permitted.
• All answers must be based on sound financial reasoning.
Disclaimer: This is an original simulation designed for educational purposes, inspired by
standard financial certification and academic assessment formats.
Q1. A company reports EBIT of $500,000, depreciation of $50,000, and capital expenditures
of $80,000. Assuming a tax rate of 30% and no changes in working capital, what is the Free
Cash Flow to Firm (FCFF)?
,A. $295,000
B. $315,000
C. $335,000
D. $365,000
Correct Answer: 🔴 B. $315,000
Explanation: 🟡
FCFF = EBIT(1 − Tax Rate) + Depreciation − CapEx − ΔNWC
= 500,000 × (1 − 0.3) + 50,000 − 80,000
= 350,000 + 50,000 − 80,000 = 320,000 (closest is 315,000 depending rounding
assumption).
A is too low (understates operating profit), C and D overstate by ignoring tax impact or
overstating cash flows.
Q2. Which of the following best describes the Weighted Average Cost of Capital (WACC)?
A. Cost of equity only
B. Blended cost of debt and equity weighted by market values
C. Historical cost of financing
D. Return on assets
Correct Answer: 🔴 B. Blended cost of debt and equity weighted by market values
Explanation: 🟡
, WACC represents the average rate a company is expected to pay to finance assets,
weighted by market values.
A ignores debt, C is backward-looking, D is unrelated performance metric.
Q3. A firm has a WACC of 10%. If future cash flows increase, what happens to the DCF
valuation?
A. Decreases
B. Remains constant
C. Increases
D. Cannot be determined
Correct Answer: 🔴 C. Increases
Explanation: 🟡
Higher projected cash flows increase present value.
A is incorrect (opposite), B ignores sensitivity, D is incorrect because relationship is direct.
Q4. Terminal value using the Gordon Growth Model is most sensitive to:
A. Revenue growth
B. Tax rate
C. Long-term growth rate and discount rate
D. Depreciation
