PRIVATE EQUITY DCF MODELING TEST - (30 QUESTIONS) UP-TO-DATE ACTUAL EXAM
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Candidate Name: ____________________________
Candidate ID: ________________________________
Date: _______________________________________
Examination Centre: __________________________
Time Allowed: 120 Minutes
Total Questions: 30
Instructions to Candidates:
This assessment evaluates your ability to apply discounted cash flow (DCF) modeling
techniques within a private equity context. You are required to demonstrate advanced
financial reasoning, including forecasting, valuation, and sensitivity analysis. Answer all
questions. Each question presents four options, with only one correct answer. Calculators
,are permitted. Carefully read each scenario and select the most appropriate response
based on rigorous financial logic and best practices in private equity modeling.
Core Competency Areas Covered:
Leveraged Buyout (LBO) Modeling
Free Cash Flow (FCF) Forecasting
Terminal Value Estimation
Weighted Average Cost of Capital (WACC)
Sensitivity and Scenario Analysis
Exit Multiples and IRR Calculations
This simulated examination is designed for advanced finance professionals and
candidates preparing for private equity roles. It assesses both conceptual understanding
and technical execution of valuation models under realistic investment scenarios.
Disclaimer:
This is an original simulated examination inspired by professional private equity modeling
,assessments. It is not affiliated with or sourced from any official examination body.
Q1. A private equity firm is evaluating a target company with projected unlevered free
cash flows growing at 5% annually. If the discount rate is 10% and the terminal growth
rate is 3%, what is the primary risk of using a perpetuity growth method for terminal
value?
A. Overestimating near-term cash flows
B. Underestimating capital expenditures
C. Overvaluing long-term growth assumptions
D. Ignoring working capital changes
Correct Answer: 🔴 C. Overvaluing long-term growth assumptions
Explanation: 🟡 The perpetuity growth method is highly sensitive to the terminal growth
rate. If the growth rate is set too high relative to economic growth, it inflates terminal value
disproportionately. Option A is unrelated to terminal value. Option B affects FCF but not
specifically terminal assumptions. Option D impacts projections but not terminal valuation
sensitivity.
Q2. In an LBO model, which component most directly drives equity IRR?
A. Revenue growth
, B. Debt repayment schedule
C. Depreciation expense
D. Tax rate
Correct Answer: 🔴 B. Debt repayment schedule
Explanation: 🟡 Equity IRR in LBOs is heavily influenced by how quickly debt is repaid, as
this increases equity value at exit. Revenue growth (A) contributes but is less direct.
Depreciation (C) is non-cash. Tax rate (D) affects cash flow but is secondary to leverage
dynamics.
Q3. A company has EBIT of $50M, tax rate 25%, D&A of $10M, CapEx of $15M, and
increase in NWC of $5M. What is unlevered free cash flow?
A. $25M
B. $30M
C. $32.5M
D. $35M
Correct Answer: 🔴 B. $30M
Explanation: 🟡 UFCF = EBIT(1-T) + D&A - CapEx - ΔNWC = 50×0.75 +10 -15 -5 = 37.5
+10 -15 -5 = 30. Options A, C, D reflect calculation errors.
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Candidate Name: ____________________________
Candidate ID: ________________________________
Date: _______________________________________
Examination Centre: __________________________
Time Allowed: 120 Minutes
Total Questions: 30
Instructions to Candidates:
This assessment evaluates your ability to apply discounted cash flow (DCF) modeling
techniques within a private equity context. You are required to demonstrate advanced
financial reasoning, including forecasting, valuation, and sensitivity analysis. Answer all
questions. Each question presents four options, with only one correct answer. Calculators
,are permitted. Carefully read each scenario and select the most appropriate response
based on rigorous financial logic and best practices in private equity modeling.
Core Competency Areas Covered:
Leveraged Buyout (LBO) Modeling
Free Cash Flow (FCF) Forecasting
Terminal Value Estimation
Weighted Average Cost of Capital (WACC)
Sensitivity and Scenario Analysis
Exit Multiples and IRR Calculations
This simulated examination is designed for advanced finance professionals and
candidates preparing for private equity roles. It assesses both conceptual understanding
and technical execution of valuation models under realistic investment scenarios.
Disclaimer:
This is an original simulated examination inspired by professional private equity modeling
,assessments. It is not affiliated with or sourced from any official examination body.
Q1. A private equity firm is evaluating a target company with projected unlevered free
cash flows growing at 5% annually. If the discount rate is 10% and the terminal growth
rate is 3%, what is the primary risk of using a perpetuity growth method for terminal
value?
A. Overestimating near-term cash flows
B. Underestimating capital expenditures
C. Overvaluing long-term growth assumptions
D. Ignoring working capital changes
Correct Answer: 🔴 C. Overvaluing long-term growth assumptions
Explanation: 🟡 The perpetuity growth method is highly sensitive to the terminal growth
rate. If the growth rate is set too high relative to economic growth, it inflates terminal value
disproportionately. Option A is unrelated to terminal value. Option B affects FCF but not
specifically terminal assumptions. Option D impacts projections but not terminal valuation
sensitivity.
Q2. In an LBO model, which component most directly drives equity IRR?
A. Revenue growth
, B. Debt repayment schedule
C. Depreciation expense
D. Tax rate
Correct Answer: 🔴 B. Debt repayment schedule
Explanation: 🟡 Equity IRR in LBOs is heavily influenced by how quickly debt is repaid, as
this increases equity value at exit. Revenue growth (A) contributes but is less direct.
Depreciation (C) is non-cash. Tax rate (D) affects cash flow but is secondary to leverage
dynamics.
Q3. A company has EBIT of $50M, tax rate 25%, D&A of $10M, CapEx of $15M, and
increase in NWC of $5M. What is unlevered free cash flow?
A. $25M
B. $30M
C. $32.5M
D. $35M
Correct Answer: 🔴 B. $30M
Explanation: 🟡 UFCF = EBIT(1-T) + D&A - CapEx - ΔNWC = 50×0.75 +10 -15 -5 = 37.5
+10 -15 -5 = 30. Options A, C, D reflect calculation errors.
