1. What do the asset turnover ratios measure?

A.Management's effectiveness in generating sales from investments in assets.

B.The liquidity of the firm's current assets.

C.The distribution of assets in which funds are invested.

D.The overall efficiency and profitability of the firm.

2. Which of the following statements is false when discussing valuation methodology?

A.The cost of equity requires data on betas, market equity risk premiums and the risk free rate of return.

B.Unlevered free cash flows are annual cash flows freely available to all providers of capital in the business, after accounting for all necessary reinvestments.

C.Terminal values can be determined using DCF or Exit Multiples

D.Because the terminal value is a long-term projection, it has minimal impact on the final valuation of the firm.

3. At a WACC (discount rate) of 20%, what is the net present value of the cash flows shown below?

On January 1, 2016, shares of Company X trade at $6.50 per share, with 400 million shares outstanding. The company has net debt of $300 million. After building an earnings model for Company X, you have projected free cash flow for each year as follows: Year 2016 2017 2018 2019 2020 2021 2022 FCF 110 120 150 170 200 250 280 Weighted average cost of capital 10% Long-term FCF growth rate 3%