All interest bearing debt less cash and equivalents
Correct Answer All interest bearing debt less cash and equivalents
Explanation
Net debt is all interest bearing debt less cash and cash equivalents.
2How do you ûnd the terminal value using the EV/EBITDA exit multiple?
Your Answer Terminal EV = EV/EBITDA x EBITDA value of ûnal year of forecast
Correct Answer Terminal EV = EV/EBITDA x EBITDA value of ûnal year of forecast
Explanation
The EBITDA value used must be the EBITDA value of the ûnal year of forecast.
3Which of the following is the correct deûnition for free cash üows to the ûrm?
Your Answer EBIT x (1 - Tax Rate) + Depreciation +/- Changes in Working Capital - Capex
Correct Answer EBIT x (1 - Tax Rate) + Depreciation +/- Changes in Working Capital - Cape
Explanation
Free Cash Flow = EBIT x (1 - Tax Rate) + Depreciation +/- Changes in Working Capital - Ca
4What is the cost of equity using the capital asset pricing model if the risk free rate is 4.5%
premium is 4.25%?
Your Answer 11.94%
Correct Answer 11.94%
Explanation
Cost of equity = 4.5% + 1.75 x 4.25% = 11.94%
5. WHAT is WACC, if Equity is 12% cost of debt 25%, 20 million market value of debt, 60 milli
ost of equity = 12%
Cost of debt after tax = 10% x (1-25%) = 7.5%
Weight of equity = 60/(60+20) = 75%
Weight of debt = 20/(60+20) = 25%
WACC = 12% x 75% + 7.5% x 25% = 10.9%
6The chart type we used to build the football ûeld chart was?
Your Answer Stock chart - Open-high-low-close
Correct Answer Stock chart - Open-high-low-close
Explanation
Please review the Presentation of Results section.
9Based on the course, which of the following ratios commonly estimates the terminal value
analysis?
Your Answer EV/EBITDA
Correct Answer EV/EBITDA
Explanation
EV/EBITDA is commonly used to estimate the terminal value in a DCF analysis (Exit Multiple
value of the entire company generated from the core business operations. This multiple be
company past the forecast period.
10 What is the net debt?
Your Answer 225 million
Correct Answer 225 million
Explanation
Net debt = 25 + 250 - 50 = 225
11 What is the enterprise value?
Your Answer 1,350 million
Correct Answer 1,350 million
Explanation
Enterprise value = 1,125 + 225 = 1,350
12 What is the enterprise value-to-revenue (EV/Sales) multiple?
Your Answer 0.9
Correct Answer 0.9
Explanation
EV/Sales = 1,350 / 1,500 = 0.9
13 What is the enterprise value-to-EBIT (EV/EBIT) multiple?
Your Answer 7.5
Correct Answer 7.5
Explanation
EV/EBIT = 1,350 / 180 = 7.5
14 What is the price-to-earnings (P/E) multiple?
Your Answer 9
Correct Answer 9
Explanation
P/E = 1,125 / 125 = 9
15 What is the price-book (P/B) multiple?
Your Answer 1.55
Correct Answer 1.55
Explanation
P/B = 1,125 / 725 = 1.55
16 What is the share price when the enterprise value-to-sales (EV/Sales) multiple of a comp
Your Answer 10.75
Correct Answer 10.75
Explanation
EV = 0.8 x 1200 = 960
Net debt = 150 + 50 - 100 = 100
Market cap = 960 - 100 = 860
Share price = 860/80 = 10.75
17 What is the share price when the price-to-earnings (P/E) multiple of a comparable comp
Your Answer 12.2
Correct Answer 12.2
Explanation
Market cap = 6.5 x 150 = 975
Share price = 975/80 = 12.2
18 Calculate the terminal value using the EV/EBITDA multiple method.
Your Answer 593,555
Correct Answer 593,555
Explanation
Terminal value from EV/EBITDA = EV/EBITDA multiple x EBITDA of the last forecasted perio
19 Calculate the terminal value using the perpetual growth method.
Your Answer 611,363
Correct Answer 611,363
Explanation
Terminal value from perpetual growth = Free Cash Flow x (1+growth rate) / (discount rate
(11%-5%) = 611,363
20 Calculate the intrinsic enterprise value using the average of terminal values derived from
growth methods.
Your Answer 451,512
Correct Answer 451,512
Explanation
Use Excel XNPV function to calculate the intrinsic enterprise value. =XNPV(discount rate,tra
See answer in the solution ûle:
Business_Valuation_Modeling_Solution.xlsx
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Valuation multiples
Calculating share price using multiples
Calculating terminal value and intrinsic value
of forecast
ear of forecast
of forecast.
to the ûrm?
orking Capital - Capex
Working Capital - Capex
in Working Capital - Capex
he risk free rate is 4.5%, the beta is 1.75 and the equity risk
et value of debt, 60 million market value of equity
mates the terminal value in a discounted cash üow (DCF)
CF analysis (Exit Multiple) because EV/EBITDA measures the
rations. This multiple best estimates the value of a
Sales) multiple of a comparable company is 0.8?
e of a comparable company is 6.5?
he last forecasted period = 8.5 x 69,830 = 593,555
th rate) / (discount rate Ð growth rate) = 34935 x (1+5%) /
minal values derived from the EV/EBITDA multiple and perpetual
=XNPV(discount rate,transaction FCFF values,dates)
nance Institute.
All interest bearing debt less cash and equivalents
Correct Answer All interest bearing debt less cash and equivalents
Explanation
Net debt is all interest bearing debt less cash and cash equivalents.
2How do you ûnd the terminal value using the EV/EBITDA exit multiple?
Your Answer Terminal EV = EV/EBITDA x EBITDA value of ûnal year of forecast
Correct Answer Terminal EV = EV/EBITDA x EBITDA value of ûnal year of forecast
Explanation
The EBITDA value used must be the EBITDA value of the ûnal year of forecast.
3Which of the following is the correct deûnition for free cash üows to the ûrm?
Your Answer EBIT x (1 - Tax Rate) + Depreciation +/- Changes in Working Capital - Capex
Correct Answer EBIT x (1 - Tax Rate) + Depreciation +/- Changes in Working Capital - Cape
Explanation
Free Cash Flow = EBIT x (1 - Tax Rate) + Depreciation +/- Changes in Working Capital - Ca
4What is the cost of equity using the capital asset pricing model if the risk free rate is 4.5%
premium is 4.25%?
Your Answer 11.94%
Correct Answer 11.94%
Explanation
Cost of equity = 4.5% + 1.75 x 4.25% = 11.94%
5What is the weighted average cost of capital if a business has a cost of equity of 12%, a c
million market value of debt, and 60 million market value of equity?
Your Answer 11.5%
Correct Answer 10.9%
Explanation
Cost of equity = 12%
Cost of debt after tax = 10% x (1-25%) = 7.5%
Weight of equity = 60/(60+20) = 75%
Weight of debt = 20/(60+20) = 25
r of forecast
year of forecast
of forecast.
to the ûrm?
Working Capital - Capex
n Working Capital - Capex
s in Working Capital - Capex
the risk free rate is 4.5%, the beta is 1.75 and the equity risk
cost of equity of 12%, a cost of debt of 10%, tax rate of 25%, 20
