CFM CFM Valuation Methods & DCF Modeling 2

Question 1

In a precedent transactions analysis, what does the 'control premium' refer to?

Accepted Answer

The premium paid above the target's pre-deal market price to acquire control

Answer

The discount applied to minority stake purchases

Answer

The cost of management retention packages post-acquisition

Answer

The regulatory filing fee paid to the SEC

Question 2

Which sensitivity analysis tool in Excel allows a financial modeler to test two variables simultaneously and display results in a matrix?

Accepted Answer

Two-Variable Data Table

Answer

Goal Seek

Answer

Solver

Answer

Scenario Manager

Question 3

When calculating the cost of equity using CAPM, which component measures the stock's sensitivity to market movements?

Accepted Answer

Beta

Answer

Risk-free rate

Answer

Equity risk premium

Answer

Credit spread

Question 4

A company's WACC is 10% and its projected free cash flows grow at 3% in perpetuity. What is the terminal value using the Gordon Growth Model if Year 5 FCF is $50M?

Accepted Answer

$714M

Answer

$500M

Answer

$833M

Answer

$1,000M

Question 5

In a sum-of-the-parts (SOTP) valuation, each business segment is valued separately primarily because:

Accepted Answer

Different segments may warrant different valuation multiples or methodologies

Answer

Consolidated financials do not include segment data

Answer

GAAP requires separate disclosure of divisional valuations

Answer

Debt cannot be allocated across operating segments

Question 6

Which financial metric is typically used as the denominator when applying an EV/Revenue multiple in early-stage company valuation?

Accepted Answer

Next twelve months (NTM) projected revenue

Answer

Trailing twelve months (TTM) EBITDA

Answer

Net income after taxes

Answer

Operating cash flow