Equity

Question 1

Porters 5 Forces

Answer 1

Threat of new entrants
Threat of substitutes
Bargaining power of buyers
Bargaining power of suppliers 
Rivalry among existing competitors

Question 2

Adjusted Beta

Answer 2

(2/3 * regression beta) + (1/3 * 1)

Question 3

Adaptive Strategy

Answer 3

Less Predictable & Less Malleable

Question 4

Classical strategy

Answer 4

Less Malleable & More Predictable

Question 5

Shaping Strategy

Answer 5

More Malleable & Less Predictable

Question 6

Visionary Strategy

Answer 6

More Malleable & More Predictable

Question 7

Gordon Growth Model

Answer 7

V0 = [D0*(1+g)] / (r-g) = D1 / (r-g)

Question 8

PVGO =

Answer 8

V0 - (E1 / r)

Question 9

H-Model

Answer 9

V0 = [(D0 * (1+gL)) / (r - gL) ] - [(D0 * (t/2) * (gS - gL)) / (r-gL)]

Question 10

FCFF from NCI:

Answer 10

FCFF = NI + D + [Int * (1-t)] - FCInv - WCInv

Question 11

FCFF from EBIT:

Answer 11

FCFF = [EBIT * (1-t)] + D - FCInv - WCInv

Question 12

FCFF from EBITDA:

Answer 12

FCFF = [EBITDA * (1-t)] + (T*D) - FCInv - WCInv

Question 13

FCFF from CFO:

Answer 13

FCFF = CFO + [Int * (1-t)] - FCInv

Question 14

FCFE from FCFF:

Answer 14

FCFE = FCFF + [Int * (1-t) + Net Borrowing

Question 15

FCFE from NI:

Answer 15

FCFE = NI + D - FCInv - WCInv + Net Borrowing

Question 16

FCFE from CFO:

Answer 16

FCFE = CFO - FCInv + Net Borrowing

Question 17

Justified Leading P/E

Answer 17

P0 / E1 = (1-b) / (r-g)

Question 18

Justified Trailing P/E

Answer 18

P0 / E0 = [(1-b)(1+g)] / (r-g)

Question 19

Justified P/B

Answer 19

(ROE - g) / (r-g)

Question 20

Justified P/S

Answer 20

[(E0/S0) * (1-b) * (1+g)] / (r-g)

Question 21

Residual Income Model Valuation

Answer 21

V0 = B0 + Sum[PV(NI - (Equity*Ke)] = B0 + [(ROE -r) * B0] / (r-g)

Question 22

Discount for lack of control:

Answer 22

DLOC = 1 - [1 / (1 + Control premium)]