Adventis Financial Modeling Certification (FMC) Level 2 Exam (Latest 2023/ 2024 Update) Questions and Verified Answers| 100% Correct| Grade A

Adventis Financial Modeling Certification
(FMC) Level 2 Exam (Latest 2023/ 2024
Update) Questions and Verified Answers|
100% Correct| Grade A
Q: a security pays $100 in 3 years and you are required a minimum rate of return of 12%
annually. What is the maximum amount you will purchase this security for today?
Answer:
$71.18
Q: You receive a loan for $1000. The loan accumulates interest at a rate of 6.5%. How much
will interest will you owe in 4 years?
Answer:
$286.47
Q: If you unleveled free cash flow of $100 in year 5, a perpetuity growth rate of 3.0% and a
discount rate of 12.0%, what is the terminal value in todays’s dollars?
Answer:
$649.39
Q: A company has unlevered free cash flow of $100 in years 1-5 of $10, 12.5, 13.5, 14, and 15
EBITDA in year 5 is $10. What is the terminal value in today’s dollars?
Answer:
$34

Q: Assuming a company has the below unlevered free cash flow, what is the present value of
the terminal value assuming a 15.0% discount rate and a 3.0% perpetuity? Cash flow for years 1-
5 are $125, 150, 165, 180, and 200.
Answer:
$853
Q: A company has 40% equity and 60% debt. It cost of equity is 13.5%. Its cost of debt is 6.0%
and its corporate tax rate is 35%. What is the WACC?
Answer:
7.7%
Q: All else being equal, when a deal is funded with more equity, what happens to the
debt/ebitda ratio?
Answer:
it is reduced
Q: Which of the following is false?
Answer:
transaction value – net debt = enterprise value
Q: Equity value is:
Answer:
shares outstanding * price per share
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an investor puts $50 million of equity capital into a business in exchange for 90% equity stake. Three years later, the business is sold for 90 million transaction value. When its sold, it has $15 million of debt and $3 million of cash. What is the annualized return to the investor
12.0%

an investor puts $50 million of equity capital into a business in exchange for 90% equity stake. Three years later, the business is sold for 90 million transaction value. When its sold, it has $10 million of debt and $3 million of cash. What is the cash on cash multiple to the investor?
1.9x

an investor puts $40 million of equity capital into a business in exchange for 90% equity stake. Three years later, the business is sold for 90 million transaction value. When its sold, it has $10 million of debt and $3 million of cash. What is the purchase price of the deal at exit?
$83

Which of the following statements is false?
subordinated debt holders are only paid after equity holders are paid

All else being equal, what happens to investor returns if interest expense on debt increases?
investor returns increase

if a company is announced to be sold for a transaction value of $15 million and it has $2.5million od debt and $2.0 million of cash, what is the purchase price of the company?
$14.5 million

which of the following statements is false in regards to calculating terminal value
unlike the perpetuity method, in the exit multiple to terminal value is not discounted back five years to arrive at the present value

what is the calculation for present value
future/(1+discount rate)^term

a security pays $100 in 3 years and you are required a minimum rate of return of 12% annually. What is the maximum amount you will purchase this security for today?
$71.18

You receive a loan for $1000. The loan accumulates interest at a rate of 6.5%. How much will interest will you owe in 4 years?
$286.47

If you unleveled free cash flow of $100 in year 5, a perpetuity growth rate of 3.0% and a discount rate of 12.0%, what is the terminal value in todays’s dollars?
$649.39

A company has unlevered free cash flow of $100 in years 1-5 of $10, 12.5, 13.5, 14, and 15 EBITDA in year 5 is $10. What is the terminal value in today’s dollars?
$34

Assuming a company has the below unlevered free cash flow, what is the present value of the terminal value assuming a 15.0% discount rate and a 3.0% perpetuity? Cash flow for years 1-5 are $125, 150, 165, 180, and 200.
$853

A company has 40% equity and 60% debt. It cost of equity is 13.5%. Its cost of debt is 6.0% and its corporate tax rate is 35%. What is the WACC?
7.7%

All else being equal, when a deal is funded with more equity, what happens to the debt/ebitda ratio?
it is reduced

Which of the following is false?
transaction value – net debt = enterprise value

Equity value is:
shares outstanding * price per share

Which of the following statements about a P/E multiple is false?
It isnt affected by non-cash expenses

Which of the following does not belong with enterprise value in a multiple?
net earnings

Which of the following pairs belong together?
enterprise value and EBITDA

Enterprise value is:
similar in theory to transaction value

what is the formula for equity value?
share price * shares outstanding

Which of the following does not belong with enterprise value in a multiple?
All of these options belong with enterprise value

Companies A and B both have revenue of $1,500 and EV/Revenue multiples of 1.25x. Company A has an EV/EBITDA of 5.0x and Company B has an EV/EBITDA of 6.0x. What is Company B’s EBITDA
$312.50

Companies A and B both have revenue of $1,000 and EV/Revenue multiples of 1.5x. Company A has an EV/EBITDA of 6.0x and Company B has an EBITDA margin of 15%. What is Company B’s EBITDA multiple?
10.0x

Companies A and B both have revenue of $1,250 and EV/Revenue multiples of 1.5x. Company A has an EV/EBITDA of 8.0x and Company B has an EBITDA margin of 25%. What is Company B’s EBITDA multiple?
5.0x

Which of the following pairs together?
equity value and EBITDA

What is the formula for enterprise value?
equity value less debt plus cash

which of the following statements about P/E multiple is false?
it is dependent on capital structures and is therefore affected by debt levels

What is the difference between trading comparables and acquisition comparables?
trading comparables change as the share price changes in the stock market…

which of the following statements about P/E multiple is false?
it is dependent on capital structure and is therefore affected by debt levels

which of the following below line items is not included in calculating unlevered free cash flow in a DCF?
interest

if a company is announced to be sold for a transaction value of $10 million and it has $3 million of debt and $2.0 million of cash, what is the purchase price of the company?
$11.5 million

a company has 40% equity and 60% debt. It cost of equity is 6.0% and its corporate tax rate is 35%. What is the WACC?
7.7%

You receive a loan for $1,000. The loan accumulates interest at a rate of 6.5%. How much will interest will you owe in 4 years?
$286.47

what is the primary difference between trading comparables and acquisition comparables? #2
trading comparables changes as the share price changes in the stock market, wheras acquisition comparables are based on historical M&A transactions

if a company is announced to be sold for a tranaction value of $10 million and it has $3 million of debt and . $1.5 million of cash, what is the purchase price of the company? #11
$8.5 million

a COMPANY HAS 40% EQUITY AND 60% debt. Its cost of equity is 16.5%, its cost of debt is 5.0% and its corporate tax rate is 35%. What is the Wacc? #19
8.6%

An LBO model does not include: #22
WACC

An investor puts $40 million of equity capital into a business in exchange for a 90% equity stake. Three years later, the business is sold for $90 million transaction value. When its sold, it has $10 million of debt and $3 million of cash. What is the annualized return to the investor #23
23.1%

An investor puts $40 million of equity capital into a business in exchange for a 90% equity stake. Three years later, the business is sold for $90 million transaction value. When its sold, it has $10 million of debt and $3 million of cash. What is the cash-on-cash multiple of the investor?
1.9x

which of the following pairs does not belong?
enterprise and net earnings

Why are acquisition multiples typically higher than comparable companies analysis
acquisition multiples typically incorporate a premium

Companies A and B both have revenue of $1,000 and EV/Revenue multiples of 1.5x. Company A has an EV/EBITDA of 6.0x and Company B has an EV/EBITDA of 8.0x. What is company A’s EBITDA?
$250

If you unleveled free cash flow of $10 in year 5, a perpetuity growth rate of 2.5% and a discount rate of 12.0%, what is the terminal value in today’s dollars?
$61.22

A company has unlevered free cash flow of $100 in years 1-5 of $10, 12.5, 13.5, 14.0, and 15.0. What is the value of the 5-year projection period assuming a 14.0% discount rate and a 2.0% perpetuity rate?
$44

A company has unlevered free cash flow in years 1-5 of $125, $150, $165, $180, and $250. What is the present value of the terminal value assuming a 11.0% discount rate and 3.0% perpetuity rate?
$1,910

companies A and B both revenue of $1,250 and EV/Revenue multiples of 1.5x. Company A has an EV/EBITDA of 8.0x and Company B has an EBITDA margin of 25%. what is company B’s EBITDA multiple?
6.0x

You receive a loan for $20,000. The loan accumulates interest at a rate of 4.5%. How much will interest will you owe in 4 years?
$3,850.37