CFM CFM Valuation Methods & DCF Modeling 3

Question 1

Which approach calculates equity value by subtracting net debt from enterprise value?

Accepted Answer

Bridge from EV to equity value

Answer

Bottom-up approach

Answer

Intrinsic value method

Answer

Residual income approach

Question 2

In a leveraged buyout (LBO) context, what does the 'entry multiple' refer to?

Accepted Answer

The EV/EBITDA multiple paid by the sponsor to acquire the target

Answer

The interest coverage ratio at deal close

Answer

The equity return multiple generated at exit

Answer

The debt-to-equity ratio used to structure the deal

Question 3

When building a three-statement model, which statement is completed last because it depends on both the income statement and balance sheet?

Accepted Answer

Cash Flow Statement

Answer

Income Statement

Answer

Balance Sheet

Answer

Statement of Stockholders' Equity

Question 4

A company trades at a P/E of 15x and has EPS of $4.00. If EPS grows to $5.00 and the multiple remains constant, what is the new implied share price?

Accepted Answer

$75

Answer

$60

Answer

$80

Answer

$90

Question 5

What is the primary purpose of normalizing EBITDA before applying a valuation multiple?

Accepted Answer

To remove one-time, non-recurring items so EBITDA reflects ongoing earning power

Answer

To reduce the company's reported tax liability

Answer

To convert GAAP figures to IFRS standards

Answer

To exclude depreciation from the calculation

Question 6

Which of the following best describes a 'football field' chart in investment banking presentations?

Accepted Answer

A horizontal bar chart displaying valuation ranges across multiple methodologies

Answer

A bar chart showing quarterly revenue growth

Answer

A scatter plot comparing EV/EBITDA to revenue growth

Answer

A waterfall chart showing EBITDA-to-free-cash-flow conversion