Adventis FMC Level 2 2025 UPDATE|
COMPREHENSIVE QUESTIONS AND VERIFIED
ANSWERS (COMPLETE SOLUTIONS) GUARANTEED
SUCCESS |GRADE A+!! (100% ACCURATE) GET IT
RIGHT!!
2 primary types of relative valuation - ✔✔1. comparable company analysis
2. acquisition comparables analysis
comparable companies analyses (public trading comparables analyses) - ✔✔- most common
types of relative valuation
- these methods allow investors to compare valuation of similar companies by comparing
similar ratios
most common public trading comparable ratios - ✔✔1. EV/EBITDA
2. EV/Revenue
3. Net income/Earnings (share price/earnings per share)
assume a company has $5M of EBITDA and two public companies most similar to the company
trade at 6.0x and 7.0x EBITDA, what might you conclude - ✔✔- Ex: 7.0 = x/5 ; 6.0 = x/5
- can conclude that EV for the company should be between 30-35 million
what happens when a company trades at a multiple that is a premium or a discount to the
industry average - ✔✔investors will dig in to understand the rationale
assume that a company trades at 7.0x EBITDA but the average of comparable companies is
9.0x, what can we conclude - ✔✔the company is being undervalued and the investor will
, look to buy shares because he realizes that the share price will increase Wall St. begins to value
the company in-line with its peers
acquisition comparables analysis (transaction comparables analysis) - ✔✔represent
comparable acquisitions that have taken place and have been publicly announced
are multiples for acquisition comparables higher or lower than mulitples for comparable
companies - ✔✔higher because acquirers need to pay a premium to the current share price
to gain control of the company
most common type of intrinsic valuation - ✔✔DCF analysis
what is DCF analysis - ✔✔it is the process of projecting future cash flows and discounting
them to their PVs by using TVM
steps for DCF - ✔✔1. project future cash flows
2. discount future cash flows to their PV's
3. Find the PV of all cash flows beyond the projection period (terminal value)
cash flow metric used for DCF analysis - ✔✔unlevered FCF
unlevered FCF - ✔✔- cash flow available to all stakeholders
- not affected by capital structure
- doesn't include interest expense
why is tax-effected EBIT used rather than net income - ✔✔- the valuation should not depend
on capital structure
- applying the tax-rate directly to EBIT without subtracting interest expense eliminates the
impact of capital structure to cash flow
COMPREHENSIVE QUESTIONS AND VERIFIED
ANSWERS (COMPLETE SOLUTIONS) GUARANTEED
SUCCESS |GRADE A+!! (100% ACCURATE) GET IT
RIGHT!!
2 primary types of relative valuation - ✔✔1. comparable company analysis
2. acquisition comparables analysis
comparable companies analyses (public trading comparables analyses) - ✔✔- most common
types of relative valuation
- these methods allow investors to compare valuation of similar companies by comparing
similar ratios
most common public trading comparable ratios - ✔✔1. EV/EBITDA
2. EV/Revenue
3. Net income/Earnings (share price/earnings per share)
assume a company has $5M of EBITDA and two public companies most similar to the company
trade at 6.0x and 7.0x EBITDA, what might you conclude - ✔✔- Ex: 7.0 = x/5 ; 6.0 = x/5
- can conclude that EV for the company should be between 30-35 million
what happens when a company trades at a multiple that is a premium or a discount to the
industry average - ✔✔investors will dig in to understand the rationale
assume that a company trades at 7.0x EBITDA but the average of comparable companies is
9.0x, what can we conclude - ✔✔the company is being undervalued and the investor will
, look to buy shares because he realizes that the share price will increase Wall St. begins to value
the company in-line with its peers
acquisition comparables analysis (transaction comparables analysis) - ✔✔represent
comparable acquisitions that have taken place and have been publicly announced
are multiples for acquisition comparables higher or lower than mulitples for comparable
companies - ✔✔higher because acquirers need to pay a premium to the current share price
to gain control of the company
most common type of intrinsic valuation - ✔✔DCF analysis
what is DCF analysis - ✔✔it is the process of projecting future cash flows and discounting
them to their PVs by using TVM
steps for DCF - ✔✔1. project future cash flows
2. discount future cash flows to their PV's
3. Find the PV of all cash flows beyond the projection period (terminal value)
cash flow metric used for DCF analysis - ✔✔unlevered FCF
unlevered FCF - ✔✔- cash flow available to all stakeholders
- not affected by capital structure
- doesn't include interest expense
why is tax-effected EBIT used rather than net income - ✔✔- the valuation should not depend
on capital structure
- applying the tax-rate directly to EBIT without subtracting interest expense eliminates the
impact of capital structure to cash flow
