RN el eau MULTIPLE CHOICE THEORY. Write the letter of the best answer before the number of the question or statement being answered 1, This has been defined by the industry as transactions that would yield future economic benefits as a result of past transactions. a. Asset b. Equity c. Net Assets d. Shares of Stocks 2. These are investments which are already in the going concern state, as most business are in the optimistic perspective that they will grow in the future. a. Green Field Investments b. Brown Field Investments c. Blue Field Investment 4d. Black Field Investments 3. These are business opportunities which are those businesses that has a long term into infinite operational period. a. Going Concer Business Opportunities b. Perpetual Business Opportunities c. Stable Business Opportunities 4. Strategic Business Opportunities 4, The beauty of GCBOs is that we already have a reference for their performance either on similar nature of business or from its historical performance. With this, the risk indicators can be identified easily and therefore can be quantified accordingly. The Committee of Sponsoring Organization of the Treadway Commission (COSO) suggests that risk management principles must be observed as well in doing businesses and determining its value. It was noted in their report that the benefits of having a sound Enterprise-wide Risk Management allows for the company as follows, except ’2. decrease the opportunities with risk being managed well b. facilitates the management and identification of the risk factors that affect the business c. improve management and distribution of resources across the enterprise d. make the business more resilient to abrupt changesRT heon esate a suueescesc 4 5. These are the amounts of cash availabe for dstnbution to boy, debt and equity claim from the business or asset a. Operating Cash flows b. Investing Cash flows c. Financing Cash flows 4d. Net Cash flows 6. There are two levels of net cash flows, these are and ‘a. (1) Net Cash Flows to the Firm; and (2) Net Cash Flows to Equity b. (1) Net Cash Flows to the Firm; and (2) Net Cash Flows to Creditors, ¢. (1) Net Cash Flows to the Creditors; and (2) Net Cash Flows to Equity d. None of the above since there are three levels of net cash flows. 7. This represents the cash flows which was described in the preceding paragraph. This is the amount made available to both debt and equity claims against the company. a, Net Cash Flows to the Firm b. Net Cash Flows to Creditors c. Net Cash Flows to Equity 4. Operating Cash Flows 8. 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. a. Net Cash Flows to the Firm b. Net Cash Flows to Creditors c. Net Cash Flows to Equity 4d. Operating Cash Flows 9. This represents the value of the company in perpetuity or in a going concern environment a, Terminal Value b. Salvage Value . Perpetuity Value 4. Infinity ValueRe ee ean aureus 10. DCF Analysis is most applicable to use when the following are available, except a. Validated Operational and Financial Information b. Reasonable appropriated cost of capital or required rate of return c. Cashflow Pricing Multiples d. New quantifiable information 11. This is a technique that uses relevant drivers for growth and performance that can be used as proxy to set a reasonable estimate for the value of an asset or investment prospective. a. Comparable Company Analysis b. DCF Analysis c. Market Analysis d. Public Company Analysis 12. In determining the value using comparable company analysis the following factors must be considered, except, a. Non quantitative factors must also be considered b. Period of observation must be comparable c. Comparators may be at least with the similar company size even in different industry d. Variables used in determining the ratios must be the same 13. This ratio represents the relationship of the market value per share and the earnings per share. It sends the signal on how much the market perceives the value of the company as compared to what it actually eared a. Price Earnings Ratio b. Book to Market Ratio c. Dividend Yield Ratio d. EBITDA Multiple 14, This is used to determine the appreciation of the market to the value of the company as oppose to the value it reported under its Statement of Financial Position. a. Price Earnings Ratio b. Book to Market Ratio ¢. Dividend Yield RatioRENT keon sake u uae eke] ¢, EBITDA Multiple 15. This describes the relationship between the dividends recg per share and the appreciation of the market on the price of tne company, a, Price Earnings Ratio b. Book to Market Ratio c. Dividend Price Ratio d. EBITDA Multiple 16. This represents for the net amount of revenue after deductin operating expenses and before deducting financial fixed costs, taxes and non-cash expenses. a. Price Earnings Ratio b. Book to Market Ratio c. Dividend Price Ratio 4. EBITDA Multiple 17. This is the excess of the earnings after deducting the cost of capital a. Net Cash Flow to Equity b. Economic Value Added c. Net Income after Interest 4d, EBITDA 18. Once the value of the asset has been established, there are factors that can be considered to properly value the asset. Which of the following are not part of the other factors to be considered in Valuation? a. earning accretion b. eaming dilution cc. equity control premium d. All of the above 19. These are additional value inputted in the calculation that would account for the increase in value of the firm due to other quantifiable attributes like potential growth, increase in prices, and even ‘operating efficiencies. @. earning accretion b. earning dilution c. equity control premium d. Precedent Transactions [Sank eee eePe ee eterna 20. This is the amount that is added to the value of the firm in order to gain control of it, a. earning accretion b. earning dilution ¢. equity control premium d. Precedent Transactions 21. These are experiences, usually similar with the opportunities available. These transactions are considered risks that may affect further the ability to realize the projected earnings. a. earning accretion b. earning dilution . equity control premium 4. Precedent Transactions 22. This works differently with accretion. But, this should also be considered in the sensitivity analysis. a. earning accretion b. earning dilution . equity control premium 4d. Precedent Transactions 23. Which of the following is not a Method under Asset Based Valuation? a. Discounted Cash Flow Analysis b. Economic Value Added c. Comparable Company Analysis d. All of the above 24. Which of the following statements is not correct? a. The beauty of GCBOs is that we already have a reference for their performance either on similar nature of business or from its historical performance. b. Asset has been defined by the industry as transactions that would yield future economic benefits as a result of past transactions. c. Most investors diversify their investment in various ‘opportunities, but the challenge is determining the value on how much they are willing to acquire it 4. Going concern business opportunities are those businesses that has a short term into infinite operational periodx RUN ken setae nue snese sy 25. Which of the following statements is not correct? a. The operating cash flows are the amounts of cash avai for distribution to both debt and equity claim from tne business or asset. b. The advantage of EBITDA is that it already excludes | interest that represents the cost of financing the asse, | taxes you pay to the government because this should bg | accounted separately, and depreciation and amortization Which is part of the capital expenditures which will be deducted separately as well c. Since GCBOs is assumed to operates in a long period of time to almost perpetuity. The risk and returns are inherey to the opportunity should also be quantified d. Terminal Value represents the value of the company in perpetuity or in a going concern environment.Pe eo ery aoa eciss MULTIPLE CHOICE PROBLEM. Write the letter of the best answer before the number of the question or statement being answered. 4. Green Tea Corp. reported the following information: Revenue of Php 32,500, Operating Expenses of Php16,250. Included in the operating expense are salaries and wages of Php1,450, depreciation of Php500, and rentals of Php275. The interest expense incurred is Php200. How much is the EBITDA for the period? a. Phpt6,750 b. Php16,250 c. Php16,550 d. Php14,025 2. Comerstone Inc. reported revenue for the period amounting to Php75,200 and EBITDA Margin of 60%. How much is the operating expenses excluding depreciation? a. Php75,200 b. Php45,120 c. Php30,080 d. Zero 3. Singapore Ltd. has reported Php125,000 revenue where their EBITDA Margin is 45%. If the taxes are 30% of the EBITDA. How much is the Net Cash Flows if the capital expenditure was purchased at Php1,500? a. Php37,875 b. Php39,375 c. Php58,250 d. Php46,625 4, Malaysia Inc. purchased a capital expenditure amounting to Php1,500 and reported revenue of Php125,000 and operating expenses is Php50,000. The company incurred Php§00 for interest. If the depreciation is Php§,000, how much is the Net Cash Flows? Tax Rate is 30% a, Php75,000 b. Php57,650 cc. Php52,150 4. Php56,150ROTO rechiesas eau 5. Pawikan Corp. reported the following information: [Year [Net Cash Flows | | 1 | Php250 2 Php300. | See Eps aOR een How much is the net present value of the Net Cash Flows, us | it | discount rate of 10%? a | a. Php300.12 | b. Php900.85 | c. Php738.17 | d. Php1,000 | 6. Dracaris Inc. purchased an investment and expected to earn: i ‘Year Net Gash Flows | | [4] Php2s0 al | 2 | Php300 ] | 3 | Php4s0 | | TV__[ Phps0o Assuming a 5% discount factor, how much is the net present value based on the foregoing question? a. Phpt75.38 b. Php247.81 cc. Php1,500 d. Php1,250 7. Using the data in No. 6, how much is the net present value if the investment made was done within the year? a. Php175.38 \ b. Php247.81 | . Php1,500 d. Php1,250 8. Tres-Martirez Inc, has reported net cash flows amouting Php625,000. The terminal value is assumed to end at 8 years. ‘Assuming the historical information has 5% growth rate, how much is the terminal value? a, Php625,000 b. Php31,000 c. Php12,500 4. Php15,000 SS eeDel Kee esau users 9. Using the assumptions in No. 8, what is the present value of Terminal value? a. Php625 b. Phpt2 c. Php4,086 d. Php38,273 10. Uranus Co. Ltd reported net income of Php2,750 while 8 years ago net income is at Php2,000 only. How much is the compounded annualize growth rate? a. 4.65% b. 4.56% c. 5.25% d. 5.65% 11. Pluto Corp., a listed company, sells its share in the stock market at Php13.5 per share with EPS of Php 2.5. Based on the foregoing how much is the PIE Ratio? a 54 b. 5.0 © 25 4.35 42. If Jupiter Inc.’s market value per share is Php27S Million. The EPS it generated is Php12.50. What is the P/E ratio? a. Php 27.5 b. Php 20.0 c. Php32.8 d. Php12.§ 13. Sunflower Inc. provided the following information EPS is Php25 per share while P/E Multiple is 2.0. How much is MVPS? a. PhpS0 b. Php50.75 cc. Php4s d. PhpSs 44, Leone Inc., a listed corporation, reported on its Statement of Financial Position total assets of Php85,000,000. The company maintain its debt ratio of 70% and have outstanding capital stocks of 1 million. Given their performance and financial stability their stocks were traded at Pnp30 per share. Based on the foregoing, the book to market ratio of Leone Ine. isVALUATION CONCEPTS AND METHODOLOGIES a 10 b. 0.95 c. 0.90 d. 0.85 15. The management accountant of Yza Belle Inc. has calculated thei, book value per share at Php 6.25. If Yza Belle shares will be soig using the average book to market ratio for the industry similar tothe company of 0.68, the price per share would be atleast a. 9.19 b. 6.25 4.25 4. 10.00 For 16 to 17. Raphael Marco Corp., a company with outstanding common shares of 1,000,000 and 10% preferred shares amounting to Php? ,000,000. 16. Raphael Marco's earnings per share based on its reported net | income of Php7,250,000 is, a. Php 7.35 b. Php 7.28 cc. Php7.15 d. Php7.05 17. The firms similar to Raphael Marco is having a P/E Multiple of 4. Given the earnings per share calculated in No.16, the reasonable market value per share should be a. Php29.40 b. Php29.00 cc. Php28.60 4. Php28.20 18. Lucille Inc. declared its dividends at Php1.25/share. The company's stocks were last traded at Php45 per share. The dividend yield of the company is a. 36 b. 0.028 ©. 0.28 d. 28Pe eee ues 19. Uno Corp. declared its dividend consistent with its dividend yield of 0.10 or 10%. This year, Uno Corp's stockholder receives Php0.75 for every share they have in the company. Based on the foregoing, the company’s market value per share when the divided was declared should be a. Php0.075) b. Php7.50 c. Php3.s d. Php0.05 20. Martyne Inc.'s market capitalization is already around Php67,000, when they had reported their revenue at Php32,500, which is 50% of the operating expenses. Out of the operating expenses the company’s cost to depreciate its assets is Php500. The market capitalization is the basis for the market value per share when divided into the company's outstanding shares of 1,000. Based on the foregoing, Martyne’s EBITDA multiple is about a 4.25 b. 4.12 c. 4.00 d. 2.00 21. JVL Holdings Inc. reported its EBITDA margin at 25% when their revenues are Php30,000,000. JVL Holdings has outstanding shares of 1,000,000. The company would like to sell its stocks, upon doing research the firms similar to JVL Holdings disclosed the following EBITDA multiple: Dot Corp. @ 8.00; Period Corp. @ 7.5; Exclamation Inc. @ 6.25. Using the average EBITDA multiple, the potential market value per share of JVL Holdings is, a. Phps4.38 b. Php60.52 ¢. PhpS0.25 4. Php52.17 For 22 to 23. VMV Corp. is planning to expand and new projects is expecting to earn an average of Php375,000. If the project requires for Php5,000,000 investment at 10% cost of capital 22. The Economic Value Added is a. Php125,000 b. (Php125,000) cc. Php875,000 d._(Php875,000)VALUATION CONCEPTS AND METHODOLOGIES 23. VMV Corp recomputed the earings and resulted to an average gy Php750,000 per year. The economic value added in this Scenario is Pnp125,000 (Php 125,000) Php250,000 (Php250,000) aoce 24. Based on No.22 except that the cost of capital is raised to 15%, the economic value added to breakeven should be a. Php125,000 b. Php250,000 cc. Php500,000 ¢. Php750,000 28. Victoria Corp. estimated its terminal value on the 5" year of operations from the time of the valuation to be Php825 Million. Using the discount rate of 5%, the present value of the terminal value is Php825.00 Million Php785.71 Million Php678.73 Million Php646.41 Million aoc 26. BMV Inc. has outstanding stocks of 1,500,000 and market value per share of Php22.50 with a P/E Ratio of 4. The company has sustained it net income margin at 25%. The revenue of BMV Inc. should be a. Php33,750,000 b. Php22,500,000 cc. Php8,437,000 . Php90,000,000 27. BMV Inc. has outstanding stocks of 1,500,000 and market value per share of Php22.50 with a P/E Ratio of 4. The company has sustained it net income margin at 25%. The company's reported EBITDA Margin is 40%. The EBITDA of BMV Inc, should be Php33,750,000 Php8,437,000 Php13,500,000 Php20,250,000 BogeRe Teor uaa Kwek2 Corp. has 1,000,000 outstanding shares and reported its Earnings per Share at Php 14.25. Kwek2 Corp. targets to increase its net income by 410% for the succeeding years hence they spent Php20,000,000. The estimated depreciation is Php500,000 per year starting year 1. The company's cost of capital is 8% 28. The net cash flows for Year 1 is Php5,250,000 (Php5,250,000) Php14,750,000 (Php, 750,000) aero 29, The net cash flows for Year 2 is a. Php16,225,000 b. (Php16,225,000) cc. Php15,675,000 4d. (Php15,675,000) 30. The net present value of the cash flows for 3 years is, Php23,217,132.17 (Php23,217,132.17) Php21,802,364.35 (Php21,802,364.35)OO ee RT kas esau asus cry Problem Solving ™ 2-1. Frequently Corp has projected that their performance for the Fextfive i years will result to the following: Year Revenue ‘Operating Exp” Taxes {iced 50.00 30.00 6.00 2 55.00 33.00 6.60 3 60.50 36.30 7.26 4 66.55 39.93 7.99 SeeeaeTS21, 43.92 8.78 A property was purchased at the beginning amounting to Php150 Million ‘The terminal value was assumed based on the growth rate of the cash flows. The outstanding loans is Php16.62 Million. The required rate of return for this business is 12%. How much is the Terminal Value? How much is the Discounted Net Cash Flows to the Firm? How much is the Discounted Net Cash Flows to the Equity? ‘Assuming there are no outstanding loans, how much is the Discounted Net Cash Flows to the Equity? ‘+ Assuming that the required rate of retum is 10%, how much is the Discounted Net Cash Flows to the Equity? RENT WEST PEE ” P2-2. An investor was offered by an existing stockholder to purchase his shares from Sansrival Corp at Php16.00 per share. The outstanding shares of the company is 1 Million. the year 1 revenue is PhpS Million and expected | to constantly grow by 5%. The EBITDA margin remains to be stable at 50% Taxes are 30% of EBITDA. The required rate of return is 10%. Their ‘outstanding loans is Php17 Million. + How much is the value of the stocks? Are you going to accept the offer? * How much is the value of the stocks if the there is no loans outstanding? * Are you going to accept the offer if the required return is 12%? Why? P2-3 Casyo Inc. reported an EBITDA of Php12.50 Miilion. After 5 years itis projected to be Php21.86 Million. The required retum is 8%.eee etary aan oss How much is the terminal value? How much is Net Cash Flows — Firm? «How much is the Net Cash Flows - Equity? + How much is the Net Cash Flows — Equity if the outstanding loans is Php 100 Million? 2-4. Compute for the price earnings ratio if the earnings per share is Php5.50: Market Value per share | 27.500 30.250 22.000 47.875 28.875 J P:E Ratio er] ||] P2-5, LMVL Co., a publicly listed company, reported earnings for the year amounting to Php25 Million with outstanding shares of 1 Million. The market value per share of LMVL Co. is Php122. What the P/E Ratio of LMVL Co. (round your answer to the nearest ones)? Suppose that LMVL Co. sets as the industry leader, LVVL Co. another player in the same industry is being eyed by an investor. The reported EPS Of LVVL Co. is Php10. If the investor is aware of the LMVL Co.'s performance, how much should the investor value LVL Co.? 2.6, Listed Automobile industry players has the following market value and earnings per share Player oe Saale Earnings Per | pie Ratio A 46.50, 5.00 6] meee 603 c | 16.25 2.18 D 26.11 372 E 34.32 4.29Rye etn eaab aos METHODOLOGIES (0 the performance of another firm in the same te An analyst is looking in sd eamnga of Php tah industry but is not isted, the company report share. How much is the value of the firm’ 2-7. Bebe Co. declared dividends of Php2 per share for their performanos last year after the deciaration of dividends the market value per share increased to Php4s per share. What is the dividend yield ratio of Bebe Co > P2.8. Lumina Inc’s statement of financial position as of December 31, 2019 reported the following: Asset ~ Php 400 Milion; Liabilities — Php 100 Milion; Equity ~ Php300 Million with outstanding shares of 10 Million. The Lumina’s stock is already selling at Php37 per share. How much is the Book-to- Market Ratio? ‘Assuming Lumina Inc has not available market information, but the industry Book-to-Market Ratio is 1.2 what is the market value of Lumina? 2.9. Ancient Times Corp., a closed corporation and selling its shares to an investor. The statement of income of the company for the period ending December 31, 2019 is as follows: Ancient Times Corp. Statement of Income For the Period Ending December 31, 2019 (ia million pesos) Revenue 1500 Cost of Sales 900 Gross Profit 600 Operating Expenses 300 Operating Income 300 Interest Expense 75 Net Income 225 ‘Ancient Times depreciation is PhpS0 million and is exempted from paying Corporate income tax. The industry where Ancient Times recognizes the EBITDA Multiple of 2.75.Re Nel Keele uma reece « How much is the EBITDA of Ancient Times for the Period? « How much is the market value of Ancient Times? «Ifthe owners is willing to sell 50% of the ownership at Php500 Million, are you going to buy the company's stake? 2.10 Liberated Inc. is exploring an investment that will required Php750 Milion that would yield and annual earnings of Php 185 Million. If the ‘company required rate of return for the company is 12%, how much is the economic value added? How much earnings is needed to be realized that will make the EVA breakeven?