Salale University College of Business and Economics

Department of Accounting and Finance

Group Assignment: Financial Modeling (20%)
Dear Students, as we approach the final examination, it is imperative to focus on the topics
covered in the course. To enhance your understanding and preparedness for the examination, I
suggest forming a team of three members and undertaking the following questions. The questions
aim to help you review the key concepts and gain a more in-depth understanding of important
topics. Additionally, the team work aspect will offer you the opportunity to learn from each other
and collaborate on your answers, which could prove beneficial in enhancing your overall
comprehension and performance in the examination. Please note that all submissions will be
collected during the final examination. I look forward to receiving your responses and wish you
all the best for the upcoming examination.
Sincerely,
Your Instructor.
Questions:
1. What is the goal of corporate valuation?
2. What are the main components of the Discounted Cash Flow (DCF) model?
3. What are the key assumptions underlying the DCF method of valuation and how do they
affect the results?
4. What is the weighted average cost of capital (WACC)?
5. What factors influence the risk-free rate and how does it vary over time?
6. What are the different types of risk that are typically considered in a financial model?
7. What is the time value of money and how is it used in financial modeling?
8. How is risk managed in a financial model and what are the primary uses of a sensitivity analysis?
9. A company has free cash flows of $1 million per year for the next five years. The discount
rate is 10%. What is the Enterprise Value, under PV of the Free Cash Flows: DCF ‘Top
Down’ Valuation?
10. Suppose a company has the following financial information:
 Total assets: $100 million
 Total liabilities: $50 million
 Cash and cash equivalents: $10 million
 Accounts receivable: $20 million
 Inventory: $30 million
 Property, plant, and equipment, net: $40 million
 Suppose the company has 10 million shares outstanding and the current share price is $5.
 Calculate the enterprise value under Accounting Book Values approach.