VALUATION METHOD: "DISCOUNTED CASH FLOW METHOD"

TRUE OR FALSE

1. Discounted cash flows analysis can be done by determining the present value of the Net Cash Flows of the investment opportunity.*

True

False

2. The Net Cash Flows are the amounts of cash available for distribution to equity claim from the business or asset.*

True

False

3. The amount that should be included in determining the value of the asset is the amount of cash that will be available for the claims of the equity owners and creditors.*

True

False

4. For GCBO, the net cash flows generated will be based on Cash from Operations which are composed of the cash flows from operating and investing activities, since this represents already the amount earned or will be earned from the business and the amount that is required for you to infuse in the operations to generate more profit.*

True

False

5. In discounted cash flows method, the value of investment opportunities is highly dependent on the value that the asset will generate from now until the future.*

True

False

6. Terminal Value represents the value of the company in perpetuity of a going concern business.*

True

False

7. The Net Cash Flows to Equity represents the amount of cash flows made available to the equity stockholders after deducting the net debt or the outstanding liabilities to the creditors less available cash balance of the company.*

True

False

8. There are three levels of Net Cash Flows: (1) Net Cash Flows to the Firm; (2) Net Cash Flows to Creditors and (3) Net Cash Flows to Equity.*

True

False

9. Discounted cash flows analysis is meticulous but more conservative method or approach that can be used to determine the asset value for it clearly demonstrate the movement of the transactions.*

True

False

10. Civil Engineers are good candidate for Financial Model role given their ability to understand operational models and design long term financial strategies.*

True

False

MCQs

1. Which of the following is not a type of non-cash charges that are included in the computation of net income?*

Depreciation

Impairment of pension assets

After-tax interest expense

Amortization

2. ____________ growth rate is factored in to serve as a growth driver for the demand of the product, particularly for the merchandising or manufacturing business*

Product

Inflation

Gross National

Population

3. These are business opportunities that has long-term to infinite operational period*

Going Concern Business Opportunities

Strategic Business Opportunities

Stable Business Opportunities

Perpetual Business Opportunities

4. This represents the cash flows made available to both debt and equity claims against the company.*

Net Cash Flows to Equity

Net Cash Flows to Creditors

Net Cash Flows to the Firm

Operating Cash Flows

5. In determining the value of the equity value using discounted cash flows, ___________________ are comprised by activities based on operating and investing activities, then adjusted by the financing activities to determine the ________________ which is the basis for equity value.*

Net Cash Flows to the Firm; and Net Cash Flows to Creditors

Net Cash Flows to the Creditors; and (2) Net Cash Flows to Equity

None of the above since there are three levels of net cash flows

Net Cash Flows to the Firm; and Net Cash Flows to Equity

6. The usual growth indicators used in financial modeling are as follows, except _____________.*

Population

Gross National Product

Inflation

Consumer price index

7. This represents the amount of cash flows made available to the equity stockholders after deducting the net debt or the outstanding liabilities to the creditors less available cash balance of the company.*

Net Cash Flows to Creditors

Operating Cash Flows

Net Cash Flows to Equity

Net Cash Flows to the Firm

8. This refers to the amount of cash available for distribution to both debt and equity claim from the business or asset.*

Net cash flows

Financing cash flows

Investing cash flows

Operating cash flows

9. This will serve as the dashboard to enable the modelers to analyze the results and to facilitate the readers' appreciation on the results of the project.*

Assumption Sheet

Title Page

Cover Page

Data Key Results

10. The ___________ can be used to determine the appropriate cost of capital by weighing the portion of the asset was funded through equity and debt.*

Capital Asset Pricing Model

Weighted Average Cost of Capital

All of the above

Cost of Equity and Debt Model