All answers must be correct and well explained

1. Is the net income of a year the money the company made that particular year or is it a

number whose significance is quite doubtful?

2. Is depreciation the loss of value of fixed assets?

3. The so-called "cash flow" (net income plus depreciation) is a flow of cash, but is it a

flow to the shareholders or to the company?

4. The dividend is the part of the net income that the company distributes to

shareholders. As the dividend represents real money, the net income is also real

money. Is that true?

5. The part of the net income that is not distributed to shareholders goes to reserves

(shareholders' equity). As dividends represent real money, reserves are also real

money. Is that true?

6. Does the shareholders' equity represent the savings a company has accumulated

through the years?

7. Is book value the best proxy to the value of the shares?

8. Is a valuation realized by a prestigious investment bank a scientifically approved

result which any investor could use as a reference?

9. Is it possible for a company with a positive net income and which does not distribute

dividends to find itself in suspension of payments?

2 - IESE Business School-University of Navarra

10. There are four ways a company can use the money it generates: a) buying other

companies or assets; b) reducing its debt; c) distribute it to shareholders, and d)

increasing its cash holdings. What other reasonable things can it do?

11. Assuming a company wishes to distribute money to its shareholders, is it better to

distribute dividends or to repurchase shares?

12. Is the price of futures the best estimate of the /$ exchange rate?

13. How could we obtain an indisputable discount rate? How should we calculate the beta

and the risk premium?

14. My company paid an extremely high price for the acquisition of another company; the

price was recommended by the valuation of an investment bank. We now have

financial problems. Is there any way to make that bank legally responsible for this

situation?

15. Which currency has to be used in an international acquisition in order to calculate the

flows?

16. Calculated betas provide different information if they are obtained by using daily,

weekly or monthly data. Which data is the most appropriate?

17. Does is make any sense to calculate betas against local indexes when a company has a

great part of its operations outside this local market? I have two examples: BBVA and

Santander.

18. Is it possible to make money in the stock market when the quotations are going

down? What is credit sale?

19. Which capital structure should we consider when calculating the WACC for a subsidiary

valuation: the one that is reasonable according to the risk of the subsidiary's business,

the average of the company or the one the subsidiary "tolerates/permits"?

20. Are there any ways to analyze and value seasonal businesses?

21. A financial consultant obtains different valuations of my company when it discounts the

Free Cash Flow (FCF) as opposed to when it uses the Equity Cash Flow. Is this correct?

22. Which parameter better measures value creation; the EVA (Economic Value Added),

the economic profit or the CVA (Cash Value Added)?

23. How could we project exchange rates in order to be able to forecast exchange

differences?

24. Is it possible to use a constant WACC in the valuation of a company with a changing

debt?

25. Which method should we use to valuate young companies with high growth but

uncertain futures? Two examples were Boston Chicken and Telepizza when they began.

26. Which of these two methods is better: discounting the Equity Cash Flow or

discounting the Free Cash Flow?

IESE Business School-University of Navarra - 3

27. Is it possible to value companies by calculating the present value of the EVA

(Economic Value Added)? Which are the necessary hypotheses so that such valuations

provide similar results to discounting cash flows?

28. At times, companies accuse investors of performing credit sales that they make their

quotations fall. Is that true?

29. What impact does high inflation have on the value of a business?

30. Is it possible to use different WACCs in order to discount each year's flows? In which

cases?