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Wallstreet Prep Exam: Transaction Comps Modeling Questions and Complete Solutions

HEAL100 Health Care — exam and revision material · Other

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Health Care exam material, 7 pages. Originally published on StudyMerit.

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7
Academic year
2025/2026
Language
English

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Financial Modeling Exam Wall Street Prep 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 D&A 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 SG&A 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 SG&A 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 messages.downloaded_by lOMoARcPSD|6879242

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• 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 non-controlling interest - ANSWER is an expense on the income statement and equity o the balance sheet A company has the following information: • 2013 retained earnings balance of $12 billion • Net income of $3.5 billion in 2014 • Capex of $200 million in 2014 • Preferred dividends of $100 million in 2014 • Common dividends of $400 million in 2014 What is the retained earnings balance at the end of 2014? - ANSWER 15 billion in order to find out how much cash is available to pay down short term debt, such as revolving credit line, you must take - ANSWER beginning cash balance + pre-debt cash flows - min. cash balance - required principal payments of LT and other debt to calculate interest expense in the future, you should do which of the following - ANSWER apply a weighted average interest rate times the average debt balance over the course of the year enterprise (transaction) value represents the: - ANSWER value of all capital invested in a business A debt holder would be primarily concerned with which of the following multiples? I. Enterprise (Transaction) Value / EBITDA II. Price/Earnings III. Enterprise (Transaction) Value / Sales - ANSWER 1 and 3 only On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year through 2020 as follows: Year 2014 2015 2016 2017 2018 2019 2020 Free Cash Flow 110 120 150 170 200 250 280 You estimate that the weighted average cost of capital (WACC) for Company X is 10% and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final projected year. Estimate the present value of the projected free cash flows through 2020, discounted at the stated WACC. Assume all cash flows are generated at the end of the year (i.e., no mid-year adjustment): - ANSWER 837 million On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The messages.downloaded_by lOMoARcPSD|6879242

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company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year through 2014 as follows: Year 2014 2015 2016 2017 2018 2019 2020 Free Cash Flow 110 120 150 170 200 250 280 You estimate that the weighted average cost of capital (WACC) for Company X is 10% and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final projected year. Calculate Company X's implied Enterprise Value by using the discounted cash flow method: - ANSWER 2951.2 million On January 1, 2014, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year through 2014 as follows: Year 2014 2015 2016 2017 2018 2019 2020 Free Cash Flow 110 120 150 170 200 250 280 You estimate that the weighted average cost of capital (WACC) for Company X is 10% and assume that free cash flows grow in perpetuity at 3.0% annually beyond 2020, the final projected year. According to the discounted cash flow valuation method, Company X shares are: - ANSWER .13 per share overvalued the formula for discounting any specific period cash flow in period "t"is: - ANSWER cash flow from period "t" divided by (1+discount rate raised exponentially to "t" 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), and stage 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. the following happened in a recent M&A transaction: 1. PP&E of the target company was increased from its original book basis of $600 million to $800 million to reflect fair market value for book purposes in accordance with the purchase method of accounting. 2. no "step-up" for tax purposes. 3. original tax basis of $650 million. messages.downloaded_by lOMoARcPSD|6879242

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