Trading Comps Modeling Actual Exam Update
2024 Wall Street Prep Wall Street Prep Premium
Exam 2024 | Transaction Comps Modeling Wall
Street Prep Exam 2024 Questions and Correct
Answers Rated A+
The terminal value of a business that grows indefinitely is calculated as follows -
✔✔✔answer-cash flow from period "t+1" divided by (discount rate-growth
rate)
The two-stage dcf model is: - ✔✔✔answer-where stage 1 is an explicit
projection of free cash flows (generally for 5-10 years), andStage 2 is a lump-sum
estimate of the cash flows beyond the explicit forecast period
Disadvantages of a dcf do not include - ✔✔✔answer-free cash flows over the
first 5-10 year period represent a significant portion of value and are highly
sensitive to valuation assumptions
The typical sell-side process - ✔✔✔answer-shorter than the buy side, buyer
secures financing, and doesn't involve id'ing potential issues to address such
as ownership and unusual equity structures, liabilities, etc.
While equity contribution went as low as the single digits in the 1980's, the
current split between equity and debt in an lbo deal is best characterized as: -
✔✔✔answer-equity - 35%; debt 65%
What is generally not considered to be a pre-tax non-recurring (unusual or
infrequent) item? - ✔✔✔answer-extraordinary gains/losses
What is false about depreciation and amortization - ✔✔✔answer- dca may be
classified within interest expense
,Company x's current assets increased by $40 million from 2007- 2008 while
the companies current liabilities increased by $25 Million over the same period.
The cash impact of the change in working capital was - ✔✔✔answer-a
decrease of 15 million
The final component of an earnings projection model is calculating interest
expense. The calculation may create a circular reference because -
✔✔✔answer-interest expense affects net income, which affects fcf, which
affects the amount of debt a company pays down, which, in turn affects the
interest expense, hence the circular reference
A 10-q financial filing has all of the following characteristics except -
✔✔✔answer-issued four times a year.
Depreciation expense found in the sgca line of the income statement for a
manufacturing firm would most likely be attributable to which of the following -
✔✔✔answer-computers used by the accounting department
If a company has projected revenues of $10 billion, a gross profit margin of
65%, and projected sgca expenses of $2billion, what is the company's
operating (ebit) margin? - ✔✔✔answer-45%
A company has the following information, 1. 2014 revenues of $5
billion,2013 accounts receivable of $400 million, 2014 accounts receivable
of $600 million, what are the days sales outstanding -
✔✔✔answer-36.5
, A company has the following information:
• 2014 revenues of $8 billion
• 2014 cogs of $5 billion
• 2013 accounts receivable of $400 million
• 2014 accounts receivable of $600 million
• 2013 inventories of $1 billion
• 2014 inventories of $800 million
• 2013 accounts payable of $250 million
• 2014 accounts payable of $300 million
What are the inventory days for the company? - ✔✔✔answer-65.7 days
Which of the following is true - ✔✔✔answer-coca cola's brand name is not
reflected as an intangible asset on its balance sheet
A company has the following information:
• 2014 share repurchase plan of $4 billion
• Average share price of $60 for the year 2013
• Expected eps growth for 2014 of 10%
What should the number of shares repurchased by the company be in your
financial model? - ✔✔✔answer-60.6 million
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