Question 1

The amount of net working capital for Ideko in 2006 is closest to:

Accepted Answer

A) $22,750 
B) $35,195 
C) $30,510 
D) $26,420 
A) $22,750 
B) $35,195 
C) $30,510 
D) $26,420

Question 2

Use the following information to answer the question(s)below:
Ideko's Planned Debt
  
-If Ideko's loans will have an interest rate of 6.8%, then the interest expense paid in 2008 is closest to:

Accepted Answer

A) $6,800 
B) $7,310 
C) $7,820 
D) $7,990 
A) $6,800 
B) $7,310 
C) $7,820 
D) $7,990

Question 3

The free cash flow to equity in 2008 is closest to:

Accepted Answer

A) -5,005 
B) -1,755 
C) 5,575 
D) 9,995 
A) -5,005 
B) -1,755 
C) 5,575 
D) 9,995

Question 4

Use the following information to answer the question(s)below:    
-The after tax interest expense in 2008 is closest to:

Accepted Answer

A) 2,380 
B) 4,420 
C) 6,800 
D) 7,820 
A) 2,380 
B) 4,420 
C) 6,800 
D) 7,820

Question 5

Use the following information to answer the question(s)below:
Ideko's Planned Debt
  
-If Ideko's loans will have an interest rate of 6.8%, then the interest expense paid in 2009 is closest to:

Accepted Answer

A) $6,800 
B) $7,310 
C) $7,820 
D) $7,990 
A) $6,800 
B) $7,310 
C) $7,820 
D) $7,990

Question 6

Use the table for the question(s)below.
Capital Structure and Unlevered Beta Estimates for Comparable Firms
  
-If the risk-free rate of interest is 6% and the market risk premium has historically averaged 5%, then the cost of capital for Nike is closest to:

Accepted Answer

A) 14.7% 
B) 10.2% 
C) 9.1% 
D) 13.5% 
A) 14.7% 
B) 10.2% 
C) 9.1% 
D) 13.5%

Question 7

What range for the market value of equity for Ideko is implied by the range of EV/Sales multiples for the comparable firms if Ideko holds $6.5 million of cash in excess of its working capital needs?

Accepted Answer

Low EV/Sales (Nike)= 1.5
Low EV = Sales

Question 8

Use the table for the question(s)below.
Pro Forma Income Statement for Ideko, 2005-2010
  
-With the proper changes it is believed that Ideko's credit policies will allow for an account receivables days of 60. The forecasted accounts receivable for Ideko in 2008 is closest to:

Accepted Answer

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

Question 9

Use the following information to answer the question(s)below:    
-If Ideko's future expected growth rate is 5% and its WACC is 9%, then the continuation value in 2010 is closest to:

Accepted Answer

A) 164,200 
B) 278,775 
C) 280,450 
D) 303,425 
A) 164,200 
B) 278,775 
C) 280,450 
D) 303,425

Question 10

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2005-2010
   Pro Forma Balance Sheet for Ideko, 2005-2010
  
-Assuming that Ideko has a EBITDA multiple of 8.5, then the continuation levered P/E ratio of Ideko in 2010 is closest to:

Accepted Answer

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

Question 11

Use the tables for the question(s)below.
Estimated 2005 Income Statement and Balance Sheet Data for Ideko Corporation
   The following are financial ratios for three comparable companies:
  
-Based upon the average EV/Sales ratio of the comparable firms, if Ideko holds $6.5 million of cash in excess of its working capital needs, then Ideko's target market value of equity is closest to:

Accepted Answer

A) $165 million 
B) $157 million 
C) $193 million 
D) $191 million 
A) $165 million 
B) $157 million 
C) $193 million 
D) $191 million

Question 12

The amount of the increase in net working capital for Ideko in 2008 is closest to:

Accepted Answer

A) $4,685 
B) $3,665 
C) $4,090 
D) $5,230 
A) $4,685 
B) $3,665 
C) $4,090 
D) $5,230

Question 13

The after tax interest expense in 2010 is closest to:

Accepted Answer

A) 0 
B) 2,856 
C) 5,304 
D) 8,160 
A) 0 
B) 2,856 
C) 5,304 
D) 8,160

Question 14

What range for the market value of equity for Ideko is implied by the range of P/E multiples for the comparable firms?

Accepted Answer

Low P/E (Nike)= 18.2
Low Price

Question 15

Use the following information to answer the question(s)below:    
-If Ideko's future expected growth rate is 5%, then the estimated free cash flow for 2011 is closest to:

Accepted Answer

A) 6,568 
B) 11,151 
C) 11,218 
D) 12,137 
A) 6,568 
B) 11,151 
C) 11,218 
D) 12,137

Question 16

Use the tables for the question(s)below.
Estimated 2005 Income Statement and Balance Sheet Data for Ideko Corporation
   The following are financial ratios for three comparable companies:
  
-Based upon the average P/E ratio of the comparable firms, Ideko's target market value of equity is closest to:

Accepted Answer

A) $157 million 
B) $155 million 
C) $193 million 
D) $165 million 
A) $157 million 
B) $155 million 
C) $193 million 
D) $165 million

Question 17

Use the tables for the question(s)below.
Pro Forma Income Statement for Ideko, 2005-2010
   Pro Forma Balance Sheet for Ideko, 2005-2010
  
-Assuming that Ideko has a EBITDA multiple of 8.5, then the continuation EV/Sales ratio of Ideko in 2010 is closest to:

Accepted Answer

A) 1.7 
B) 1.9 
C) 1.6 
D) 1.8 
A) 1.7 
B) 1.9 
C) 1.6 
D) 1.8

Question 18

The free cash flow to the firm in 2010 is closest to:

Accepted Answer

A) 10,684 
B) 11,559 
C) 23,698 
D) 26,394 
A) 10,684 
B) 11,559 
C) 23,698 
D) 26,394

Question 19

The amount of net working capital for Ideko in 2008 is closest to:

Accepted Answer

A) $35,195 
B) $26,420 
C) $22,170 
D) $30,510 
A) $35,195 
B) $26,420 
C) $22,170 
D) $30,510

Question 20

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 2008?

Accepted Answer

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

Exam 19: Valuation and Financial Modeling: a Case Study

The amount of net working capital for Ideko in 2006 is closest to:

Use the following information to answer the question(s)below: Ideko's Planned Debt -If Ideko's loans will have an interest rate of 6.8%, then the interest expense paid in 2008 is closest to:

The free cash flow to equity in 2008 is closest to:

Use the following information to answer the question(s)below: -The after tax interest expense in 2008 is closest to:

Use the following information to answer the question(s)below: Ideko's Planned Debt -If Ideko's loans will have an interest rate of 6.8%, then the interest expense paid in 2009 is closest to:

Use the table for the question(s)below. Capital Structure and Unlevered Beta Estimates for Comparable Firms -If the risk-free rate of interest is 6% and the market risk premium has historically averaged 5%, then the cost of capital for Nike is closest to:

What range for the market value of equity for Ideko is implied by the range of EV/Sales multiples for the comparable firms if Ideko holds $6.5 million of cash in excess of its working capital needs?

Use the table for the question(s)below. Pro Forma Income Statement for Ideko, 2005-2010 -With the proper changes it is believed that Ideko's credit policies will allow for an account receivables days of 60. The forecasted accounts receivable for Ideko in 2008 is closest to:

Use the following information to answer the question(s)below: -If Ideko's future expected growth rate is 5% and its WACC is 9%, then the continuation value in 2010 is closest to:

Use the tables for the question(s)below. Pro Forma Income Statement for Ideko, 2005-2010 Pro Forma Balance Sheet for Ideko, 2005-2010 -Assuming that Ideko has a EBITDA multiple of 8.5, then the continuation levered P/E ratio of Ideko in 2010 is closest to:

The amount of the increase in net working capital for Ideko in 2008 is closest to:

The after tax interest expense in 2010 is closest to:

What range for the market value of equity for Ideko is implied by the range of P/E multiples for the comparable firms?

Use the following information to answer the question(s)below: -If Ideko's future expected growth rate is 5%, then the estimated free cash flow for 2011 is closest to:

Use the tables for the question(s)below. Estimated 2005 Income Statement and Balance Sheet Data for Ideko Corporation The following are financial ratios for three comparable companies: -Based upon the average P/E ratio of the comparable firms, Ideko's target market value of equity is closest to:

Use the tables for the question(s)below. Pro Forma Income Statement for Ideko, 2005-2010 Pro Forma Balance Sheet for Ideko, 2005-2010 -Assuming that Ideko has a EBITDA multiple of 8.5, then the continuation EV/Sales ratio of Ideko in 2010 is closest to:

The free cash flow to the firm in 2010 is closest to:

The amount of net working capital for Ideko in 2008 is closest to:

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 2008?

The Corporation

Introduction to Financial Statement Analysis

Financial Decision Making and the Law of One Price

The Time Value of Money

Interest Rates

Valuing Bonds

Investment Decision Rules

Fundamentals of Capital Budgeting

Valuing Stocks

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behavior and Capital Market Efficiency

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, Managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Financial Options

Option Valuation

Real Options

Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Short-Term Financial Planning

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

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