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Bài test tiếng Anh ngành ngân hàng và đáp án phần 18

Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
1. Starting a business is less risky than buying and growing a business that someone else
has already established.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
2. The founder of a company has to make many critical decisions but not any related to
strategies to sell the firm's products.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
3. Businesses do not fail because of management's inability to estimate correctly how
much money it will take to get their businesses up and running.

A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
4. A business has a better chance to succeed if one doesn't overanalyze opportunities to
the point where you are just convincing yourself not to proceed.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
5. A business has a better chance to succeed if one takes calculated risks.
A) True
B) False
Ans: A
Page 1


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
6. An LLC leads to unlimited liability for the people who make the business decisions in
the firm while enabling all investors to retain the tax advantages of a limited
partnership.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
7. Limited partnerships are no more costly to form than sole proprietorships.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy


8. Limited partnerships are more costly to form than sole proprietorships because the
partners must hire an attorney to draw up and maintain the partnership agreement.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
9. The downside of being able to raise equity capital from other people is that the
entrepreneur must inevitably share control with other investors.
A) True
B) False
Ans: A

Page 2


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
10. An S-corporation allows the stockholders to avoid double taxation but places limits on
the ownership of the firm's stock.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
11. An S-corporation can have no more than 50 stockholders.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
12. Corporations, which are “legal persons” under state law, automatically have a finite life.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
13. The two tools that are particularly useful in understanding the cash requirements of a
business and in estimating how much financing a new business will require are cash
flow break-even analysis and the cash budget.
A) True
B) False
Ans: A

Page 3


Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
14. The cash flow break-even analysis helps identify how much money will be needed to
launch a new product or business.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 1
Level of Difficulty: Easy
15. The cash budget summarizes the cash flows into and out of a firm over a period of time.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
16. The business plan presents the results from a strategic planning process that focuses on
how the business will be developed over time.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 2
Level of Difficulty: Easy
17. A business plan includes a detailed discussion of the marketing and sales activities that
will enable the business to achieve the sales and margin levels reflected in the financial
forecasts.
A) True
B) False
Ans: A

Page 4


Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
18. An important thing to remember in valuing a business is that the value of a business
changes over time.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
19. A financial investor is one who is interested in the financial performance of the firm.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
20. A strategic investor is interested in buying the firm and not just its financial
performance.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: Easy
21. Cost approaches include replacement cost and multiples analysis.
A) True
B) False
Ans: B

Page 5


Format: True/False
Learning Objective: LO 3
Level of Difficulty: medium
22. The adjusted book value approach is useful in valuing holding companies whose main
assets are publicly traded or other investment securities but is generally less applicable
for operating businesses.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: medium
23. In the transaction approach, analysts use the information on what someone has paid
for a comparable company in a merger or an acquisition to estimate a value for the firm.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 3
Level of Difficulty: medium
24. In the free cash flow to equity (FCFE) approach, an analyst values the free cash
flows that the assets of the firm are expected to produce in the future.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 3
Level of Difficulty: medium
25. The free cash flow from the firm (FCFF) approach uses only the portion of the cash
flows that are available for distribution to stockholders.
A) True
B) False
Ans: B

Page 6


Format: True/False
Learning Objective: LO 3
Level of Difficulty: medium
26. In contrast to the FCFE approach, which values cash flows that are available for
distribution to stockholders, the DDM approach values the stream of cash flows that
stockholders expect to receive through dividend payments.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 4
Level of Difficulty: medium
27. In contrast to the financial statements of publicly help firms, private company financials
often include personal expenses of the owner and excess compensation expenses.
A) True
B) False
Ans: A
Format: True/False
Learning Objective: LO 4
Level of Difficulty: medium
28. Differences in marketability can result in premiums of 30 percent or more for shares of
private companies.
A) True
B) False
Ans: B
Format: True/False
Learning Objective: LO 4
Level of Difficulty: medium
29. An important issue that must be considered when valuing a business is whether a
controlling ownership interest or a minority interest is being valued.
A) True
B) False
Ans: A

Page 7


Format: True/False
Learning Objective: LO 4
Level of Difficulty: medium
30. In valuing a business, analysts must also consider whether it is appropriate to adjust the
estimated value of the business for the likelihood that these “key people” may not
remain with the firm as long as expected.
A) True
B) False
Ans: A
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
31. The founder of a company must start from scratch and make several critical decisions
including
A) choosing the product(s) to sell.
B) choosing the best strategy for selling them.
C) raising the money necessary to develop the product(s).
D) All of the above.
Ans: D
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
32. Starting a business is _________ risky than buying and growing a business that
someone else has already established.
A) more
B) less
C) equally
D) none of the above
Ans: A
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
33. According to the text, businesses fail for a number of different reasons but not due to
A) poorly thought-out strategy.
B) a very competitive market.
C) poor management skills to properly execute a good strategy.
D) underestimating how much money it will take to get their businesses up and running.
Ans: B

Page 8


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
34. A business's chances of success improve if you do all EXCEPT
A) not jump into a business without careful thought.
B) not overanalyze opportunities to the point where you are just convincing yourself not to
proceed.
C) Take no risks.
D) not think that failure will ruin your chances of ultimately achieving business success.
Ans: C
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
35. All of the following are organizational forms EXCEPT
A) sole proprietorships, partnerships, and Z-corporations.
B) sole proprietorships, S-corporations, and limited liability companies.
C) C- Corporations, S-corporations, and LLCs.
D) C- Corporations, S-corporations, and partnerships.
Ans: A
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
36. A limited liability company (LLC) is
A) a hybrid of a limited partnership and a corporation.
B) more costly to form than sole proprietorships
C) less constrained than general partnerships because they can raise money from limited
partners.
D) All of the above
Ans: D

Page 9


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
37. Which one of the following statements is true?
A) Limited partnerships are no more costly to form than sole proprietorships.
B) Like a corporation, an LLC provides limited liability for the people who make the
business decisions in the firm while enabling all investors to retain the tax advantages of
a limited partnership.
C) The lives of partnerships and LLCs are not flexible.
D) Limited partners and LLCs are more constrained than general partnerships because they
can raise money only from limited partners or “members.”
Ans: B
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: medium
38. Which one of the following statements is NOT true?
A) An Scorporation can have no more than100 stockholders.
B) All profits of an Scorporation pass directly to the stockholders as they would pass to the
partners in a partnership.
C) An Scorporation is a variation of the Ccorporation form that is used by public
corporations.
D) Only some Ccorporations can become an Scorporation with approval from the IRS.
Ans: D
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
39. Which one of the following statements is true?
A) An Scorporation can have more than100 stockholders.
B) All profits of an Scorporation pass directly to the stockholders as they would pass to the
partners in a partnership.
C) An Scorporation is a variation of the LLC.
D) Only foreign investors can own the shares of an S-corporation.
Ans: B

Page 10


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: medium
40. Which one of the following statements is NOT true?
A) A sole proprietorship is the least expensive type of business to start.
B) The life of a sole proprietorship is unlimited
C) Sole proprietorships must rely on equity contributions from the proprietor and debt or
lease financing.
D) All profits of the sole proprietorship pass directly to the owner and are taxed at the
owner's marginal tax rate.
Ans: B
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: medium
41. Which one of the following statements is NOT true?
A) Two tools are particularly useful in understanding the cash requirements of a business and
in estimating how much financing a new business will require—cash flow break-even
analysis and the cash budget.
B) The cash flow break-even point calculation focuses on the importance of maximizing a
product's per unit contribution.
C) The cash flow break-even point does not tell one how much money will be needed to
launch a new product or business.
D) The cash flow break-even point estimates how long it will take for a product to reach the
break-even point.
Ans: C
Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: Easy
42. Which one of the following statements is true?
A) The cash budget is also a very useful planning tool for entrepreneurs
B) The cash budget summarizes the cash flows into and out of a firm over a period of time.
C) Preparing a cash budget helps an entrepreneur better understand where money is coming
from, where it is going, and how much external financing is likely to be needed and
when.
D) All of the above are true.
Ans: D

Page 11


Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
43. Which one of the following statements about business plans is true?
A) A business plan is like a road map for a business.
B) A business plan presents the results from a strategic planning process that focuses on how
the business will be developed over time.
C) A well-prepared business plan makes it easier for an entrepreneur to communicate to
potential investors precisely what returns an investor might expect to receive.
D) All of the above are true
Ans: D
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
44. A business plan is a tool that
A) can help raise capital
B) can help an entrepreneur set the goals and objectives for the company,
C) serve as a benchmark for evaluating and controlling the company's performance
D) All of the above
Ans: D
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
45. The key elements in a business plan include all but
A) an executive summary
B) a company overview
C) a dividend policy
D) a market analysis
Ans: C
Format: Multiple Choice
Learning Objective: LO 2
Level of Difficulty: Easy
46. Which one of the following elements is included in a business plan?
A) A detailed description or the product(s) and services the company will sell
B) A detailed discussion of the marketing and sales activities that will enable the business to
achieve the sales and margin levels reflected in the financial forecasts.
C) A detailed discussion of capital requirements and uses.
D) All of the above
Ans: D

Page 12


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
47. Which one of the following statements about business valuation is NOT true?
A) The value of a business changes over time.
B) There is a single value for any business.
C) There is no such thing as the value for a business.
D) Actions by competitors also affect the value of a business.
Ans: B
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: Easy
48. The value of a business changes over time because
A) changes in general economic conditions, industry conditions, and decisions that are made
by the managers all affect the value of the cash flows that a business is expected to
generate in the future.
B) actions by competitors also affect the value of a business.
C) the investment, operating, and financing decisions made by managers also affect the
value of a business.
D) All of the above
Ans: D
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
Note: Wording changed to match text
49. Which one of the following statements is NOT true?
A) A strategic investor is one who has an interest in acquiring the business.
B) The investment value of the firm to a strategic investor will take into consideration the
benefits that can accrue from the acquisition.
C) The market value of a business is likely to carry a higher value than the investment value.
D) A financial investor, on the other hand, is only interested in the financial performance of
the firm and not in acquiring the business.
Ans: C

Page 13


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
50. Which one of the following statements is NOT true?
A) Replacement cost and adjusted book value are cost-based valuation approaches.
B) The replacement cost approach involves restating the value of the individual assets in a
business to reflect their fair market values.
C) The replacement cost of a business is the cost of duplicating the assets of the business in
their present form as of the valuation date.
D) The replacement cost valuation approach is generally used to value individual assets
within a business when they are being insured.
Ans: B
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
51. The adjusted book value approach involves
A) restating the value of the individual assets in a business to reflect their fair market values.
B) valuing all tangible and intangible assets.
C) valuing holding companies whose main assets are publicly traded or other investment
securities but are generally less applicable for operating businesses.
D) All of the above
Ans: D
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
52. When using the multiples analysis approach to valuing a business, one must be aware
A) of the presence of a marketability discount that can be sizable.
B) that identifying one or more comparable firms is not an easy task.
C) of differences in the capital structures of the firms being compared.
D) All of the above.
Ans: D

Page 14


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
53. The transaction approach is difficult to use because
A) transactions data are not typically as reliable as the data available for multiples analysis,
especially when they are associated with a private firm.
B) transactions involving the purchase or sale of an entire business in an industry tend to
occur relatively infrequently and hence the data is not very timely.
C) the terms of the transactions can be difficult to assess.
D) All of the above.
Ans: D
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
54. Which one of the following statements about the free cash flow from the firm (FCFF)
approach is NOT true?
A) The present value of these cash flows exceeds the total value of the firm, or its enterprise
value.
B) We do not include the cash necessary to pay short-term liabilities that do not have interest
charges associated with them, such as accounts payable and accrued expenses.
C) The costs associated with noninterest-bearing current liabilities, which are included in the
firm's cost of sales and other operating expenses, are subtracted in the calculation of
FCFF.
D) the total value of the firm, VF, is computed as the present value of the FCFF, discounted
by the firm's WACC.
Ans: A
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
55. The costs associated with noninterest-bearing current liabilities, which are included in
the firm's cost of sales and other operating expenses,
A) are subtracted in the calculation of free cash flow from the firm (FCFF).
B) are added in the calculation of FCFF.
C) are not a factor in the calculation of FCFF
D) none of the above
Ans: A

Page 15


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
56. In the free cash flow from the firm (FCFF) approach, the total value of the firm, VF,
is computed as the present value of the FCFF,
A) discounted by the firm's cost of equity
B) discounted by the firm's WACC
C) discounted by the firm's cost of debt
D) None of the above.
Ans: B
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
57. The free cash flow to equity (FCFE) approach uses only the portion of the cash flows
that are available
A) for distribution to bondholders.
B) for distribution to bondholders and stockholders.
C) for distribution to stockholders.
D) None of the above.
Ans: C
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
58. The three specific cash flows associated with lenders that are included in the free cash
flow to equity (FCFE) approach are
A) the interest expense on existing debt, the repayment of debt principal, and the proceeds
from new debt issues.
B) the interest expense on existing term debt, the repayment of debt principal, and the
proceeds from new equity issues.
C) the interest expense on existing debt, the repayment of debt principal, and the payment of
dividends.
D) None of the above.
Ans: A

Page 16


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
59. In contrast to the FCFE approach, the dividend discount model (DDM) approach
values
A) cash flows that are available for distribution to stockholders.
B) the stream of cash flows that stockholders expect to receive through dividend payments.
C) cash flows that remain after payments to all lenders.
D) None of the above.
Ans: B
Format: Multiple Choice
Learning Objective: LO 4
Level of Difficulty: medium
60. Important issues that one must consider in valuing private firms include
A) whether key people remain in the firm, the amount of dividends that one may receive in
the coming years, and whether a controlling ownership interest or a minority interest is
being valued.
B) the difficulty in valuing young, rapidly growing companies in contrast to mature, stable
companies, the amount of dividends that one may receive in the coming years, and
whether a controlling ownership interest or a minority interest is being valued.
C) the difficulty in valuing young, rapidly growing companies in contrast to mature, stable
companies, whether key people remain in the firm, and whether a controlling ownership
interest or a minority interest is being valued.
D) None of the above.
Ans: C

Page 17


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: hard
61. Break-even analysis: Trident, Inc., makes designer gold bracelets. Their annual costs
include shop rent of $12,500, salaries for two jewelers of $118,000, design software
costs of $10,000, and other overhead costs of $13,000. An average bracelet is priced at
$5,500. It costs $2,000 in raw material, $1,250 in labor, and $250 in other expenses.
What is the minimum number of bracelets that need to be sold to earn a profit?
A) 28
B) 44
C) 77
D) 17
Ans: C
Feedback:
Fixed costs = $12,500 + $118,000 + $10,000 + $13,000 = $153,500.
Unit variable costs = $2,000 + $1,250 + $250 = $3,500
Unit selling price = $$5,500
Therefore,
Fixed costs
Break-even point =
Price − Unit Variable cost
$153,500
=
= 76.75 bracelets
$5,500 − $3,500
The firm needs to sell at least 77 bracelets annually before it can make a profit.

Page 18


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: medium
62. Break-even analysis: Jackson Electronics makes circuit boards and markets them to
electronic goods manufacturers. The firm has nonsalary fixed costs of $212,000 and
salary costs of $134,250. Each circuit board is sold at a price of $111.50 and involves
variable costs of $81.73 per unit. What is the break-even point for Jackson?
A) 3,105
B) 11,631
C) 4,237
D) 3,714
Ans: B
Feedback:
Fixed costs = $212,000 + $134,250 = $346,250
Unit variable costs = $81.73
Unit selling price = $111.50
Therefore,
Fixed costs
Break-even point =
Price − Unit Variable cost
$346, 250
=
= 11, 630.8 circuit boards
$111.50 − $81.73
The firm needs to sell at least 11,631 circuit boards annually before it can make a profit.

Page 19


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: medium
63. Break-even analysis: Sherwin Furniture makes period pieces. The firm has total fixed
costs of $632,750. The average piece is sold at a price of $2,125 and involves variable
costs of $1,675 per unit. What is the break-even point for this firm?
A) 1,406
B) 298
C) 167
D) 378
Ans: A
Feedback:
Fixed costs = $632,750
Unit variable costs = $1,675
Unit selling price = $2,125
Therefore,
Fixed costs
Break-even point =
Price − Unit Variable cost
$632, 750
=
= 1, 406.1 pieces
$2,125 − $1, 675
The firm needs to sell at least 1,406 pieces of furniture annually before it can make a
profit.

Page 20


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: medium
64. Break-even analysis: Triad Electrical Supply Company needs to sell 3,500 circuit
breakers to break even. Its unit variable cost is $341.50, and its unit selling price is
$713.50. What is the fixed cost of this company?
A) $2,497,250
B) $1,302,000
C) $1,195,250
D) $3,692,500
Ans: B
Feedback:
Break-even point = 3, 500 units
Unit variable costs= $341.50
Unit selling price = $713.50
Fixed costs
Break-even point =
Price − Unit Variable cost
Fixed costs
3,500 =
$713.50 − $341.50
Fixed costs = 3,500 × $372 = $1, 302,000
The firm has fixed costs of $1,302,000.

Page 21


Format: Multiple Choice
Learning Objective: LO 1
Level of Difficulty: medium
65. Break-even analysis: Johnstone Corp. wants to break even at 20,000 units on its only
product. Its unit variable cost is $63.75, and its fixed cost is $742,000. What should be
the company's unit selling price?
A) $37.10
B) $26.65
C) $100.85
D) $63.75
Ans: C
Feedback:
Break-even point = 20,000 units
Unit variable costs = $63.75
Fixed costs = $742,000
Fixed costs
Break-even point =
Price − Unit Variable cost
$742,000
20, 000 =
Price − $63, 75
 $742, 000 
Unit selling price = 
÷+ $63.75 = $100.85
 20, 000 

The firm has to sell its product at $100.85.

Page 22


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
66. Adjusted BV: Sterling, Inc., has cash of $10,000, receivables of $31,250, and
inventory of $27,445. In addition, the firm has fixed assets of $125,000. Management
has also told you that you can reasonably expect to collect 91 percent of the
receivables, that the inventory could be sold to realize 85 percent of its book value, and
that the sale of the property, plant, and equipment would yield $96,100. What is the
liquidation value of this company? Round to the nearest dollar.
A) $157,866
B) $193,695
C) $147,866
D) $183,695
Ans: A
Feedback:
The liquidation value is
Cash
$ 10,000 × 100%
=
$ 10,000.00
Accounts receivable
$ 31,250 ×
91%
=
$ 28,437.50
Inventory
$ 27,445 ×
85%
=
$ 23,328.25
Net PP&E
$125,000
$ 96,100.00
Total assets
$193,695
$157,865.75
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
67. Adjusted BV: Troy Corp. has cash of $24,250, receivables of $81,700, and inventory
of $117,875. In addition, the firm has property, plant, and equipment of $152,000.
Management has also told you that you can reasonably expect to collect 85 percent of
the receivables, that the inventory could be sold to realize 80 percent of its book value,
and that the sale of the property, plant, and equipment would yield $113,250. What is
the liquidation value of this company? Round to the nearest dollar.
A) $375,825
B) $293,695
C) $351,575
D) $301,245
Ans: D
Feedback:
The liquidation value is
Cash
$ 24,250 × 100% =
$ 24,250
Accounts Receivable
$ 81,700 × 85% =
$ 69,445
Inventory
$117,875 × 80% =
$ 94,300
Net PP&E
$152,000
$113,250
Total assets
$375,825
$301,245

Page 23


Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
68. Multiples analysis: Turner Corp. has debt of $230 million and generated a net income
of $121 million in the last fiscal year. In attempting to determine the total value of the
firm, an investor identified a similar firm in Jacobs, Inc., an all-equity firm. This firm
had 150 million shares outstanding, a share price of $14.25, and net income of $182
million. What is the total value of Turner Corp.? Round to the nearest million dollars.
A) $1,421 million
B) $1,651 million
C) $1,191million
D) $1,715 million
Ans: B
Feedback:
The P/E multiple for Jacobs Inc. is:
Total equity ($14.25 × 150, 000, 000)
P/E =
=
= 11.74
Net income
$182, 000, 000
Implied equity value for Turnbull:
VE = P / E × Net income = 11.74 × $121, 000, 000
= $1, 420,540, 000

Value of Turnbull's debt = VD = $230 million
Therefore, the implied total value of Turnbull is:
VF = VE + VD = $1,420.54 + $230.00 = $1,650.54 million
Use the following to answer questions 69-70:
Turnbull Corp. had an EBIT of $247 million in the last fiscal year. Its depreciation and
amortization expenses amounted to $84 million. The firm has 135 million shares outstanding and
a share price of $12.80. A competing firm that is very similar to Turnbull has an enterprise
value/EBITDA multiple of 5.40.

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Reference: Ref 18-1
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
69. Multiples analysis: What is the enterprise value of Turnbull Corp.? Round to the
nearest million dollars.
A) $1,334 million
B) $453.6 million
C) $1,787million
D) $1,315 million
Ans: C
Feedback:
The enterprise value/EBITDA multiple for Turnbull's competitor = 5.40
Turnbull's EBITDA
= EBIT + D&A = $247 million +$84 million$84 million
= $331 million
Turnbull's enterprise value is:
VF = Multiple × EBITDA = 5.40 × $331 million
= $1, 787.4 million

Reference: Ref 18-1
Format: Multiple Choice
Learning Objective: LO 3
Level of Difficulty: medium
70. Multiples analysis: What is the value of Turnbull Corp's debt? Round to the nearest
million dollars.
A) $121 million
B) $165 million
C) $97million
D) $59 million
Ans: D
Feedback:
No. of shares outstanding = 135 million
Share price = $12.80
Value of Turnbull's equity = VE = $12.80 x 135 million = $1,728 million
Turnbull's enterprise value = $1,787.4 million
Turnbull's debt value = VD = VF - VE = $1,787.4 - $1,727 = $59.4 million

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