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INVESTMENT BANKING
FIN 4018
Unit 8: Tutorial Questions & Answers – Discounted Cash Flow Analysis
1) A DCF analysis is premised on the principle that the value of a company can be derived
from the present value of which of the following?
A. Revenues
B. Free cash flow
C. Gross profits
D. Net working capital
2) In a DCF analysis, what is used to capture the remaining value of the target beyond the
projection period?
A. Intrinsic value
B. Enterprise Value
C. WACC
D. Terminal Value
3) In which calculation is the exit multiple method or the perpetuity growth method used?
A. Present value
B. Terminal value
C. WACC
D. FCF
4) In a DCF analysis, the target’s projected FCF and terminal value are discounted to the
present and summed to calculate the target’s:
A. Enterprise value
B. Market cap
C. Equity value
D. Current value
5) Which of the following is considered a use of cash?
A. Amortization
B. Depreciation
C. Decrease in net working capital
D. Increase in net working capital
6) Calculate the company’s free cash flow given the following information.
A. $250.0mm
B. $340.0mm
C. $500.0mm
D. $300.0mm
7) How does a decrease net working capital affect FCF?
($ in millions)
Financial Summary
EBIT $400
Capital Expenditures 100.0
Interest Expense 150.0
D&A 200.0
Increase in net working capital 40.0
Tax rate 40%
Sales 500.0
