Question 1

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $2,000, Interest on Debt = $7,000, and a tax rate of 30%.

Accepted Answer

A) $2,500 
B) $2,800 
C) $3,100 
D) $3,500 
A) $2,500 
B) $2,800 
C) $3,100 
D) $3,500

Question 2

Use the information about Billy's Burgers to answer the following question(s):
Billy's Burgers  
-Using the percent of sales method, and assuming 20% growth in sales and no change in interest expense, estimate Billy's Burgers' Net Income for 2011.

Accepted Answer

A) $23.28 million 
B) $35.76 million 
C) $24.84 million 
D) $28.16 million 
A) $23.28 million 
B) $35.76 million 
C) $24.84 million 
D) $28.16 million

Question 3

Use the information about Billy's Burgers to answer the following question(s):
Billy's Burgers  
-Using the percent of sales method, and assuming 20% growth in sales, estimate Billy's Burgers' Accounts Receivable for 2011.

Accepted Answer

A) $21.0 million 
B) $25.2 million 
C) $18.0 million 
D) $21.6 million 
A) $21.0 million 
B) $25.2 million 
C) $18.0 million 
D) $21.6 million

Question 4

What is net new financing?

Accepted Answer

Net new financing is the amoun

Question 5

Given the following data for a given period, compute the free cash flow to the firm: Net Income = $5,000
After-tax Interest Expense = $500
Depreciation = $500
Increase in NWC = $1,000
Capital Expenditures = $2,000

Accepted Answer

A) $3,000 
B) $3,500 
C) $3,700 
D) $3,900 
A) $3,000 
B) $3,500 
C) $3,700 
D) $3,900

Question 6

A firm has $50 million in equity and $20 million of debt, it pays dividends of 30% of net income, and has a net income of $10 million. What is the firm's sustainable growth rate?

Accepted Answer

A) 12% 
B) 13% 
C) 14% 
D) 15% 
A) 12% 
B) 13% 
C) 14% 
D) 15%

Question 7

A firm has interest expense of $3,500 each year for ten years. If the tax rate is 35% and the discount rate is 8%, compute the value of the interest rate tax shield.

Accepted Answer

A) $7,091 
B) $7,514 
C) $8,220 
D) $8,716 
A) $7,091 
B) $7,514 
C) $8,220 
D) $8,716

Question 8

A firm has interest expense of $6,500 each year for ten years. If the tax rate is 35% and the discount rate is 6%, compute the value of the interest rate tax shield.

Accepted Answer

A) $16,744 
B) $16,424 
C) $16,578 
D) $16,987 
A) $16,744 
B) $16,424 
C) $16,578 
D) $16,987

Question 9

Use the information about Billy's Burgers to answer the following question(s):
Billy's Burgers  
-Using the percent of sales method, and assuming 20% growth in sales, estimate Billy's Burgers' Accounts Payable for 2011.

Accepted Answer

A) $21.0 million 
B) $25.2 million 
C) $18.0 million 
D) $21.6 million 
A) $21.0 million 
B) $25.2 million 
C) $18.0 million 
D) $21.6 million

Question 10

Compute the value of a firm with free cash flows of $4,000, $4,500, and $5,000 over the next three years, a terminal firm value of $60,000 after three years, and the unlevered cost of capital is 10%. Assume that the interest rate tax shield is zero.

Accepted Answer

A) $56,191 
B) $57,234 
C) $58,098 
D) $59,123 
A) $56,191 
B) $57,234 
C) $58,098 
D) $59,123

Question 11

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2010-2015   Pro Forma Balance Sheet for Ideko, 2010-2015  
-The amount of net working capital for Ideko in 2011 is closest to ________.

Accepted Answer

A) $30,510 
B) $22,750 
C) $28,170 
D) $35,195 
A) $30,510 
B) $22,750 
C) $28,170 
D) $35,195

Question 12

A services firm does all its business in cash only. The firm projects a cash balance of $2,000 in its account after all taxes and costs are paid. The owners plan to invest $5,000 and pay a dividend of $1000. How much net new financing is needed?

Accepted Answer

A) $4,000 
B) $5,000 
C) $6,000 
D) $7,000 
A) $4,000 
B) $5,000 
C) $6,000 
D) $7,000

Question 13

Building a model for long-term forecasting reveals points in the future where the firm will have ________.

Accepted Answer

A) excess cash that can be used for dividends, debt repayment, or stock repurchases 
B) cash needs that must be funded with external financing 
C) a need for expanding property, plant and equipment to meet increases in capacity 
D) all of the above 
A) excess cash that can be used for dividends, debt repayment, or stock repurchases 
B) cash needs that must be funded with external financing 
C) a need for expanding property, plant and equipment to meet increases in capacity 
D) all of the above

Question 14

Use the table for the question(s)below.
Ideko Sales and Operating Cost Assumptions  
-Based upon Ideko's Sales and Operating Cost Assumptions, what production capacity will Ideko require in 2007?

Accepted Answer

A) 1,505,000 units 
B) 1,323,000 units 
C) 1,914,000 units 
D) 1,115,000 units 
E) 1,702,000 units 
A) 1,505,000 units 
B) 1,323,000 units 
C) 1,914,000 units 
D) 1,115,000 units 
E) 1,702,000 units

Question 15

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2010-2015   Pro Forma Balance Sheet for Ideko, 2010-2015  
-Assuming that Ideko has an EBITDA multiple of 9.4, then the continuation levered price-earnings ratio of Ideko in 2015 is closest to ________.

Accepted Answer

A) 17.2 
B) 14.5 
C) 19.0 
D) 16.4 
A) 17.2 
B) 14.5 
C) 19.0 
D) 16.4

Question 16

The estimate of a firm's value at the end of the forecast horizon using a valuation multiple is also called its ________.

Accepted Answer

A) fixed value 
B) payback value 
C) terminal value 
D) none of the above 
A) fixed value 
B) payback value 
C) terminal value 
D) none of the above

Question 17

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2010-2015   Pro Forma Balance Sheet for Ideko, 2010-2015  
-The amount of net working capital for Ideko in 2012 is closest to ________.

Accepted Answer

A) $35,195 
B) $42,420 
C) $22,170 
D) $26,420 
A) $35,195 
B) $42,420 
C) $22,170 
D) $26,420

Question 18

With the proper changes it is believed that Ideko's credit policies will extend a 60 days credit period to accounts receivables. The forecasted accounts receivable for Ideko in 2012 is closest to ________.

Accepted Answer

A) $14,525 
B) $16,970 
C) $22,710 
D) $19,690 
A) $14,525 
B) $16,970 
C) $22,710 
D) $19,690

Question 19

Given the following data for a given period, compute the free cash flow to the firm: Net Income = $10,000
After-tax Interest Expense = $1,000
Depreciation = $1,000
Increase in NWC = $1,000
Capital Expenditures = $2,000

Accepted Answer

A) $9,000 
B) $9,500 
C) $9,700 
D) $9,900 
A) $9,000 
B) $9,500 
C) $9,700 
D) $9,900

Question 20

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2010-2015   Pro Forma Balance Sheet for Ideko, 2010-2015  
-Assuming that Ideko has an EBITDA multiple of 9.4, then the continuation unlevered price-earnings ratio of Ideko in 2015 is closest to ________.

Accepted Answer

A) 17.2 
B) 16.4 
C) 14.5 
D) 28.6 
A) 17.2 
B) 16.4 
C) 14.5 
D) 28.6

Exam 18: Financial Modeling and Pro Forma Analysis

Compute the after-tax interest expense for a firm with Interest on Excess Cash = $2,000, Interest on Debt = $7,000, and a tax rate of 30%.

Use the information about Billy's Burgers to answer the following question(s): Billy's Burgers -Using the percent of sales method, and assuming 20% growth in sales and no change in interest expense, estimate Billy's Burgers' Net Income for 2011.

Use the information about Billy's Burgers to answer the following question(s): Billy's Burgers -Using the percent of sales method, and assuming 20% growth in sales, estimate Billy's Burgers' Accounts Receivable for 2011.

What is net new financing?

Given the following data for a given period, compute the free cash flow to the firm: Net Income = $5,000 After-tax Interest Expense = $500 Depreciation = $500 Increase in NWC = $1,000 Capital Expenditures = $2,000

A firm has $50 million in equity and $20 million of debt, it pays dividends of 30% of net income, and has a net income of $10 million. What is the firm's sustainable growth rate?

A firm has interest expense of $3,500 each year for ten years. If the tax rate is 35% and the discount rate is 8%, compute the value of the interest rate tax shield.

A firm has interest expense of $6,500 each year for ten years. If the tax rate is 35% and the discount rate is 6%, compute the value of the interest rate tax shield.

Use the information about Billy's Burgers to answer the following question(s): Billy's Burgers -Using the percent of sales method, and assuming 20% growth in sales, estimate Billy's Burgers' Accounts Payable for 2011.

Compute the value of a firm with free cash flows of $4,000, $4,500, and $5,000 over the next three years, a terminal firm value of $60,000 after three years, and the unlevered cost of capital is 10%. Assume that the interest rate tax shield is zero.

Use the tables for the question(s)below. Pro Forma Income Statement for Ideko, 2010-2015 Pro Forma Balance Sheet for Ideko, 2010-2015 -The amount of net working capital for Ideko in 2011 is closest to ________.

A services firm does all its business in cash only. The firm projects a cash balance of $2,000 in its account after all taxes and costs are paid. The owners plan to invest $5,000 and pay a dividend of $1000. How much net new financing is needed?

Building a model for long-term forecasting reveals points in the future where the firm will have ________.

Use the table for the question(s)below. Ideko Sales and Operating Cost Assumptions -Based upon Ideko's Sales and Operating Cost Assumptions, what production capacity will Ideko require in 2007?

Use the tables for the question(s)below. Pro Forma Income Statement for Ideko, 2010-2015 Pro Forma Balance Sheet for Ideko, 2010-2015 -Assuming that Ideko has an EBITDA multiple of 9.4, then the continuation levered price-earnings ratio of Ideko in 2015 is closest to ________.

The estimate of a firm's value at the end of the forecast horizon using a valuation multiple is also called its ________.

Use the tables for the question(s)below. Pro Forma Income Statement for Ideko, 2010-2015 Pro Forma Balance Sheet for Ideko, 2010-2015 -The amount of net working capital for Ideko in 2012 is closest to ________.

With the proper changes it is believed that Ideko's credit policies will extend a 60 days credit period to accounts receivables. The forecasted accounts receivable for Ideko in 2012 is closest to ________.

Given the following data for a given period, compute the free cash flow to the firm: Net Income = $10,000 After-tax Interest Expense = $1,000 Depreciation = $1,000 Increase in NWC = $1,000 Capital Expenditures = $2,000

Use the tables for the question(s)below. Pro Forma Income Statement for Ideko, 2010-2015 Pro Forma Balance Sheet for Ideko, 2010-2015 -Assuming that Ideko has an EBITDA multiple of 9.4, then the continuation unlevered price-earnings ratio of Ideko in 2015 is closest to ________.

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

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