DISCOUNTED CASH FLOW VALUATION EXAM - (90) UP-TO-DATE ACTUAL EXAM
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
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Candidate Name: ____________________________
Candidate ID: _______________________________
Date: ______________________________________
Examination Centre: _________________________
Time Allowed: 3 Hours
Total Questions: 90 (First Section: Questions 1–30)
Instructions to Candidates:
All questions must be answered. This examination assesses advanced competency in
discounted cash flow (DCF) valuation, including forecasting, cost of capital estimation,
terminal value computation, and sensitivity analysis. Calculators are permitted but must
not have stored financial formulas. Answers should reflect structured financial reasoning.
Each question carries equal marks. Carefully read each scenario and select the most
appropriate answer.
,Disclaimer:
This examination is an original simulation designed for educational and preparatory
purposes. It is inspired by standard financial valuation assessment formats but does not
replicate any proprietary or official examination content.
Core Competency Areas Covered:
• Free Cash Flow Modeling
• Weighted Average Cost of Capital (WACC)
• Terminal Value Estimation
• Discounting Techniques
• Financial Forecasting
• Sensitivity & Scenario Analysis
• Capital Structure Considerations
This assessment evaluates a candidate’s ability to apply discounted cash flow
methodologies in real-world financial decision-making contexts. Candidates are
expected to demonstrate analytical precision, conceptual understanding, and the ability
to interpret valuation outputs under varying assumptions. The exam reflects practical
challenges faced in investment banking, corporate finance, and equity research roles.
,Questions
Q1. A firm projects free cash flows of $10M annually for 5 years and a terminal value of
$150M. If the WACC is 10%, what is the primary impact of increasing WACC to 12%?
A. Increase in firm value
B. Decrease in firm value
C. No change in value
D. Increase in terminal value only
Correct Answer: 🔴 B. Decrease in firm value
Explanation: 🟡 Increasing the discount rate reduces the present value of future cash
flows. Option A is incorrect because higher WACC reduces value. Option C ignores
discounting mechanics. Option D is incorrect since both interim cash flows and terminal
value are affected.
Q2. Which cash flow measure is most appropriate for firm valuation in a DCF model?
A. Net Income
B. EBITDA
C. Free Cash Flow to Firm (FCFF)
D. Dividends
, Correct Answer: 🔴 C. Free Cash Flow to Firm (FCFF)
Explanation: 🟡 FCFF represents cash available to all capital providers. Net income is
accounting-based, EBITDA excludes capex, and dividends reflect policy, not operational
cash generation.
Q3. If a company has a beta of 1.5, risk-free rate of 3%, and market risk premium of 5%,
what is the cost of equity?
A. 8%
B. 10.5%
C. 12.5%
D. 15%
Correct Answer: 🔴 B. 10.5%
Explanation: 🟡 CAPM = 3% + (1.5 × 5%) = 10.5%. Other options miscalculate
multiplication or addition.
Q4. Terminal value using Gordon Growth Model is most sensitive to:
A. Tax rate
B. Growth rate
C. Depreciation
D. Inventory turnover
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Candidate Name: ____________________________
Candidate ID: _______________________________
Date: ______________________________________
Examination Centre: _________________________
Time Allowed: 3 Hours
Total Questions: 90 (First Section: Questions 1–30)
Instructions to Candidates:
All questions must be answered. This examination assesses advanced competency in
discounted cash flow (DCF) valuation, including forecasting, cost of capital estimation,
terminal value computation, and sensitivity analysis. Calculators are permitted but must
not have stored financial formulas. Answers should reflect structured financial reasoning.
Each question carries equal marks. Carefully read each scenario and select the most
appropriate answer.
,Disclaimer:
This examination is an original simulation designed for educational and preparatory
purposes. It is inspired by standard financial valuation assessment formats but does not
replicate any proprietary or official examination content.
Core Competency Areas Covered:
• Free Cash Flow Modeling
• Weighted Average Cost of Capital (WACC)
• Terminal Value Estimation
• Discounting Techniques
• Financial Forecasting
• Sensitivity & Scenario Analysis
• Capital Structure Considerations
This assessment evaluates a candidate’s ability to apply discounted cash flow
methodologies in real-world financial decision-making contexts. Candidates are
expected to demonstrate analytical precision, conceptual understanding, and the ability
to interpret valuation outputs under varying assumptions. The exam reflects practical
challenges faced in investment banking, corporate finance, and equity research roles.
,Questions
Q1. A firm projects free cash flows of $10M annually for 5 years and a terminal value of
$150M. If the WACC is 10%, what is the primary impact of increasing WACC to 12%?
A. Increase in firm value
B. Decrease in firm value
C. No change in value
D. Increase in terminal value only
Correct Answer: 🔴 B. Decrease in firm value
Explanation: 🟡 Increasing the discount rate reduces the present value of future cash
flows. Option A is incorrect because higher WACC reduces value. Option C ignores
discounting mechanics. Option D is incorrect since both interim cash flows and terminal
value are affected.
Q2. Which cash flow measure is most appropriate for firm valuation in a DCF model?
A. Net Income
B. EBITDA
C. Free Cash Flow to Firm (FCFF)
D. Dividends
, Correct Answer: 🔴 C. Free Cash Flow to Firm (FCFF)
Explanation: 🟡 FCFF represents cash available to all capital providers. Net income is
accounting-based, EBITDA excludes capex, and dividends reflect policy, not operational
cash generation.
Q3. If a company has a beta of 1.5, risk-free rate of 3%, and market risk premium of 5%,
what is the cost of equity?
A. 8%
B. 10.5%
C. 12.5%
D. 15%
Correct Answer: 🔴 B. 10.5%
Explanation: 🟡 CAPM = 3% + (1.5 × 5%) = 10.5%. Other options miscalculate
multiplication or addition.
Q4. Terminal value using Gordon Growth Model is most sensitive to:
A. Tax rate
B. Growth rate
C. Depreciation
D. Inventory turnover
