Which of the following statements is correct?

a$.$

A business with a gross margin of $60\%$ also generates a higher EBIT margin than a business

with a gross margin of $50\%.$

A business with a gross margin of $60\%$ has a higher tax rate than a business with a gross

b$.$

margin of $50\%.$

A business with a gross margin of $60\%$ has a lower tax rate than a business with a gross

c$.$

margin of $50\%.$

With everything else equal, a business with a gross margin of $60\%$ has a higher operating

d$.$

leverage than a business with a gross margin of $50\%.$ Part II: Valuation

Which of the following statements is correct?

With respect to stocks in the European Transport & Logistics sector and with everything

else equal, the WACC is typically higher for stocks with a high beta than for stocks with a

a$.$ low beta.

b$.$ A business' WACC increases when interest rates fall.

In a discounted cashflow valuation, the WACC is directly influenced by a business' EBIT

c$.$

margin.

d$.$ EV$/$EBITDA and P$/$E $($Price$/$Earnings$)$ ratios are broadly used profitability ratios.

Which of the following statements is correct?

When a stock trades at a higher P$/$E ratio than another stock, it will usually outperform

a$.$

the stock with the lower P$/$E$.$

When a listed company has a FCF yield of $5\%$ or more, this means that its stock will

b$.$

outperform a government bond with a yield of $3\%.$

When a stock trades at a P$/$B value below $1\mathrm{.}0x,$ this means that its stock faces severe

c$.$

downside risk.

With everything else equal, stocks with a high $\frac{P}{E}$ ratio are more expensive than stocks

d$.$

with a low $\frac{P}{E}$ ratio.

Which of the following statements is correct?

The disadvantage of the EV$/$EBITDA multiple is that it makes it difficult to compare

businesses in different countries and with different tax regimes.

a$.$

Stocks typically trade at a risk premium versus bonds, which is reflected in the stocks'

b$.$ Stocks typigher earnings yield $($EPS divided by share price$).$

c$.$ If a stock trades at an EV$/$EBITDA of $5x,$ its $\frac{P}{?}$ E ratio does not exceed $15x.$

If a stock trades at a Price$/$Earnings $($P$/$E$)$ of $10x,$ its Price$/$Book $($P$/$B$)$ value is higher than

d$.$

$1\mathrm{.}0x.$Which of the following statements is correct?

a$.$ If two businesses generate the same sales and EBrDDA margin, they should be worth the

same in efficient markets.

b$.$

The fair value of a business depends, amongst others, on its outlook, its earnings power, its

balance sheet structure, and its asset intensity.

c$.$

If two businesses generate the same net income, they showld be worth the same in

d$.$ A business that pays higher dividends is worth more than one that pays lower dividends.

$1\mathrm{.}1)$

Which of the following statements is correct?

a$.$

Most stocks have a beta, which is above $1\mathrm{.}0x,$ hence most stocks are riskier than the

market as a whole.

b$.$ If the beta increases, the cost of equity increases.

c$.$ a$.$ and b$.$ are incorrect

d$.$ a$.$ and b$.$ are correct.

Which of the following statements is correct?

a$.$ If the WACC is $10\%$ and the cost of equity is $12\%,$ the cost of debt is below $10\%.$

b$.$ If the WACC is $10\%$ and the cost of equity is $12\%,$ the cost of debt is above $12\%.$

c$.$ If the WACC is $10\%$ and the cost of equity is $12\%,$ the beta will be below $1.$

d$.$ If the WACC is $10\%$ and the cost of equity is $12\%,$ the risk$-$free rate will be near zero.