Questions and Answers of Financial Modeling

Based on the current competitive landscape presented in Exhibit 1, Archway’s operating profit margins over the forecast horizon are least likely to:A. decrease.B. remain constant.C. increase.Nigel
Based on Exhibit 2, Archway’s forecasted gross profit margin for 2020 is closest to:A. 62.7%.B. 67.0%.C. 69.1%.Nigel French, an analyst at Taurus Investment Management, is analyzing Archway
French’s approach to forecasting Archway’s working capital accounts would be most likely classified as a:A. hybrid approach.B. top-down approach.C. bottom-up approach.Nigel French, an analyst at
The most appropriate response to Wright’s question about the technological development is to:A. increase the required return.B. decrease the price-to-earnings multiple.C. decrease the perpetual
If the luxury electronic auto equipment industry is subject to rapid technological changes and market share shifts, how should French best adapt his approach to modeling?A. Examine base rates B.
Using Porter’s five forces analysis, which of the following competitive factors is likely to have the greatest impact on Omikroon’s petrol scooter pricing power?A. Rivalry B. Threat of
The metric used by Fromm to assess Omikroon’s performance takes into account:A. degree of financial leverage.B. operating liabilities relative to operating assets.C. competitiveness relative to
Based on Omikroon’s expectations, the gross profit margin of Omikroon’s electric scooter division in 2021 is most likely to be affected by:A. competition.B. research costs.C. cannibalization by
Which factor best justifies the five-year forecast horizon for Omikroon selected by Fromm?A. Factor 1 B. Factor 2 C. Factor 3 Gertrude Fromm is a transportation sector analyst at Tucana Investments.
Fromm’s sensitivity analysis will result in a decrease in the 2020 base case gross profit margin closest to:A. 0.55 percentage points.B. 0.80 percentage points.C. 3.32 percentage points.Gertrude
Fromm’s estimate of growth capital expenditure included in Omikroon’s PP&E under Scenario 2 should be:A. lower than under Scenario 1.B. the same as under Scenario 1.C. higher than under
To validate the forecast for rapid growth in the electronic scooter market over the next 10 years, Fromm speaks to the management of Omikroon and investor relations of ZeroWheel, a competitor. Fromm
Jupiter’s strategic real estate plan would be best characterized as a:A. reorganization.B. cost restructuring.C. balance sheet restructuring.Jane Chang is an analyst at Alpha Fund covering the real
Which of the following statements about Jupiter’s motivations for the strategic real estate plan is incorrect?A. The transactions will enable Jupiter to sell a non-core business.B. The transactions
Which of the following statements best describes Jupiter’s average capitalization rate for the sale-leaseback transactions? Jupiter’s average capitalization rate:A. is supported by the comparable
Based on Exhibit 1 and the peer median EV/EBITDA multiples, Saturn’s estimated enterprise value is closest to:A. USD392,000 million.B. USD408,000 million.C. USD421,440 million.Jane Chang is an
Which of Chang’s colleague’s three statements is correct?A. Statement 1 B. Statement 2 C. Statement 3 Jane Chang is an analyst at Alpha Fund covering the real estate and energy sectors. She and
Based on Exhibit 1, the forecasted operating income in Year 3 for the combined Stratton and Midwest is closest to:A. USD7,432.B. USD7,782.C. USD8,177.Elaine Lee is an analyst at an investment bank
Lee’s junior analyst’s comment about materiality is:A. correct.B. incorrect because the acquisition is considered a small acquisition.C. incorrect because the acquisition represents more than 10%
The weight of equity in Stratton’s capital structure as a result of the acquisition of Midwest assuming Lee’s two assumptions is closest to:A. 29%.B. 71%.C. 81%.Elaine Lee is an analyst at an
Which of Lee’s junior analyst’s three statements is correct?A. Statement 1 B. Statement 2 C. Statement 3 Elaine Lee is an analyst at an investment bank covering the energy sector. She and her
Stratton’s estimated conglomerate discount just prior to the announcement is:A. –USD17 billion.B. USD0.C. USD17 billion.Elaine Lee is an analyst at an investment bank covering the energy sector.
The potential problem with Yorkton’s approach to identifying ESG factors is the:A. promotion of uniform accounting standards.B. subjective assessment of ESG scores and rankings.C. inconsistent
The most relevant industry risk factors affecting Titian are:A. social.B. governance.C. environmental.Theresa Blass manages the Toptier Balanced Fund (the Fund) and recently hired John Yorkton, a
Which of the statements made by Yorkton on ESG factors in investment analysis is correct?A. Statement 1 B. Statement 2 C. Statement 3 Theresa Blass manages the Toptier Balanced Fund (the Fund) and
Titian faces long-term risk from ____ due to potential regulatory changes in the developing economies.Theresa Blass manages the Toptier Balanced Fund (the Fund) and recently hired John Yorkton, a
Yorkton’s ESG integration approach is likely to impact equity valuation by:A. increasing revenues.B. raising the discount rate.C. reducing operating costs.Theresa Blass manages the Toptier Balanced
After integrating the ESG factors into the discounted cash flow model, the equity value of Titian is likely to:A. decrease.B. remain unchanged.C. increase.Theresa Blass manages the Toptier Balanced
The potential conflict between or among shareholders and managers of BR Hotels can best be described as:A. voting caps.B. a principal-agent problem.C. a principal-principal problem.Emily Marker, CFA,
BR Hotels’ corporate governance risk is increased by:A. CEO duality.B. family control.C. the low percentage of independent board members.Emily Marker, CFA, is a fixed-income analyst for the Namsan
The security analysis of BR Hotels is most likely focused on:A. mitigating downside risk.B. adjusting the discount rate.C. identifying potential opportunities.Emily Marker, CFA, is a fixed-income
After integrating the ESG factors, the credit spread on BR Hotels’ bonds is most likely to:A. decrease.B. remain unchanged.C. increase.Emily Marker, CFA, is a fixed-income analyst for the Namsan
The balance sheet carrying value of Confabulated’s investment portfolio (in € thousands) at 31 December 2018 is closest to:A. 112,000.B. 115,000.C. 118,000.Burton Howard, CFA, is an equity
The balance sheet carrying value of Confabulated’s investment portfolio at 31 December 2018 would have been higher if which of the securities had been reclassified as FVPL security?A. Bugle.B.
Compared to Confabulated’s reported interest income in 2018, if Dumas had been classified as FVPL, the interest income would have been:A. lower.B. the same.C. higher.Burton Howard, CFA, is an
Compared to Confabulated’s reported earnings before taxes in 2018, if Dumas had been classified as a FVPL security, the earnings before taxes (in € thousands) would have been:A. the same.B.
Confabulated’s reported interest income would be lower if the cost was the same but the par value (in € thousands) of:A. Bugle was €28,000.B. Cathay was €37,000.C. Dumas was €55,000.Burton
Confabulated’s special purpose entity is most likely to be:A. held off-balance-sheet.B. consolidated on Confabulated’s financial statements.C. consolidated on Confabulated’s financial
In 2018, if Cinnamon is deemed to have control over Cambridge, it will most likely account for its investment in Cambridge using:A. the equity method.B. the acquisition method.C. proportionate
At 31 December 2018, Cinnamon’s total shareholders’ equity on its balance sheet would most likely be:A. highest if Cinnamon is deemed to have control of Cambridge.B. independent of the accounting
In 2018, Cinnamon’s net profit margin would be highest if:A. it is deemed to have control of Cambridge.B. it had not increased its stake in Cambridge.C. it is deemed to have significant influence
At 31 December 2018, assuming control and recognition of goodwill, Cinnamon’s reported debt to equity ratio will most likely be highest if it accounts for its investment in Cambridge using the:A.
Compared to Cinnamon’s operating margin in 2017, if it is deemed to have control of Cambridge, its operating margin in 2018 will most likely be:A. lower.B. higher.C. the same.Cinnamon, Inc. is a
At 31 December 2018, Zimt’s total assets balance would most likely be:A. highest if Zimt is deemed to have control of Oxbow.B. highest if Zimt is deemed to have significant influence over Oxbow.C.
Based on Gelblum’s estimates, if Zimt is deemed to have significant influence over Oxbow, its 2018 net income (in € millions) would be closest to:A. €75.B. €109.C. €143.Zimt,AGis a consumer
Based on Gelblum’s estimates, if Zimt is deemed to have joint control of Oxbow, and Zimt uses the proportionate consolidation method, its 31 December 2018 total liabilities(in € millions) will
Based on Gelblum’s estimates, if Zimt is deemed to have control over Oxbow, its 2018 consolidated sales (in € millions) will be closest to:A. €1,700.B. €2,375.C. €3,050.Zimt,AGis a consumer
Based on Gelblum’s estimates, and holding the size of Zimt’s ownership stake in Oxbow constant, Zimt’s net income in 2018 will most likely be:A. highest if Zimt is deemed to have control of
Compared to accounting principles currently in use, the pooling method BetterCare used for its Statewide Medical acquisition has most likely caused its reported:A. revenue to be higher.B. total
Based on Ohalin’s estimates, the amount of joint venture revenue (in $ millions)included on BetterCare’s consolidated 2018 financial statements should be closest to:A. $0.B. $715.C.
Based on Ohalin’s estimates, the amount of joint venture net income included on the consolidated financial statements of each venturer will most likely be:A. higher for BetterCare.B. higher for
Based on Ohalin’s estimates, the amount of the joint venture’s 31 December 2018 total assets (in $ millions) that will be included on Supreme Healthcare’s consolidated financial statements will
Based on Ohalin’s estimates, the amount of joint venture shareholders’ equity at 31 December 2018 included on the consolidated financial statements of each venturer will most likely be:A. higher
If Supreme Healthcare sells its receivables to the SPE, its consolidated financial results will least likely show:A. a higher revenue for 2018.B. the same cash balance at 31 December 2018.C. the same
The carrying value of Topmaker’s investment in Blanca’s debt securities reported on the balance sheet at 31 December 2016 is:A. $$10.94$ million.B. $$11.00$ million.C. $$12.00$ million.John
Based on Exhibit 1 and Blanca’s plans to borrow against its financial receivables, the new consolidated balance sheet will show total assets of:A. $$50$ million.B. $$140$ million.C. $$150$
Based on Exhibit 2, Topmaker’s investment in Rainer resulted in goodwill of:A. $$21$ million.B. $$60$ million.C. $$99$ million.John Thronen is an analyst in the research department of an
Topmaker’s influence on Rainer’s business activities can be best described as:A. significant.B. controlling.C. shared control.John Thronen is an analyst in the research department of an
Using only the information from Exhibit 2, the carrying value of Topmaker’s investment in Rainer at the end of 2016 is closest to:A. $$282$ million.B. $$317$ million.C. $$321$ million.John
Based on Exhibit 3, Topmaker’s impairment loss under IFRS is:A. $$120$ million.B. $$300$ million.C. $$400$ million.John Thronen is an analyst in the research department of an international
Based on Thronen’s value estimates on the acquisition date of 1 January 2018, the estimated value of the minority interest related to Rainer will be:A. $$300$ million.B. $$400$ million.C.
NinMount’s current ratio on 31 December 2018 most likely will be highest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full goodwill.C.
NinMount’s long-term debt to equity ratio on 31 December 2018 most likely will be lowest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full
Based on Byron’s forecast, if NinMount deems it has acquired control of Boswell, NinMount’s consolidated 2019 depreciation and amortization expense (in £ millions)will be closest to:A. 102.B.
Based on Byron’s forecast, NinMount’s net profit margin for 2019 most likely will be highest if the results of the acquisition are reported using:A. the equity method.B. consolidation with full
Based on Byron’s forecast, NinMount’s 2019 return on beginning equity most likely will be the same under:A. either of the consolidations, but different under the equity method.B. the equity
Based on Byron’s forecast, NinMount’s 2019 total asset turnover ratio on beginning assets under the equity method is most likely:A. lower than if the results are reported using consolidation.B.
Rewrite TransposeMeToo of exercise 8 so it could deal with all ranges. Rewrite exercise 8 Array functions are functions that return more than one value. For example, the Transpose worksheet function
Array functions are functions that return more than one value. For example, the Transpose worksheet function returns its argument turned by 90 degrees, as the following worksheet demonstrates: The
The annotations (using Getformula ) for worksheet formulas in this book were done with a subroutine. For example, running the subroutine on this worksheet produces the following: Write a
Rewrite the subroutine in exercise 1 so that it deals correctly with the end of the series. One possible treatment is not to ask to repeat the process when the last cell in the series is dealt
Suppose you have a spreadsheet with a series of numbers and formulas:Suppose you want to turn this into:Write a subroutine that does this. Your subroutine should:• Put in a set of parentheses and
A sliding payment schedule involves payment that changes by a fixed percentage over the life of the loan. Write a sliding payment version of the payment schedule calculator in exercise 8. In addition
A somewhat more complicated version of the subroutine in exercise 7 would produce the following, better-looking results. Write this version of the subroutine. A quick look at the Help file for the
Write a payment schedule calculator subroutine. The subroutine is to ask the user for the sum of the loan, the payment, and the interest rate. Assume payment at the end of the period. The subroutine
Rewrite the payment schedule calculator subroutine so it displays the payments broken down into interest and capital payments. The input boxes in the example were removed for compactness. Payment
Write a payment schedule calculator subroutine. The subroutine is to ask the user for the sum of the loan, the number of payments, and the interest rate. Assume payment at the end of the period. The
Rewrite the subroutine in the previous exercise so that the user interface is as demonstrated in the following screen shots. Some of the functions needed to write the subroutine were not covered in
Write a present value calculator subroutine similar to the one which appears in section 38.4. However?as illustrated below?your subroutine should ask the user for the cash flow value, the interest
Write a subroutine that displays the following message box. The message box should be on top of all other windows, and prevent the user from doing anything in any application, until one of the
Write a future value version of the function in exercise 7. Function MyPV(CF As Variant, PositiveR As Double, _NegativeR As Double) As Double A BC D E F 1 MYPV IN ACTION 2 PositiveR 3 NegativeR
Write a version of the present value function with two interest rates, one for positive cash flows and another for negative cash flows. The function should be written for use in a worksheet, and
The bank in exercise 5 changed its bonus policy and now offers the interest rate increase based on the following table. Rewrite Bank1FV(CF, r, n) to reflect this change. A в с D E BANK2FV IN
Another bank offers 1% increase in interest rate to savings accounts with a balance of more than 10,000.00. Write a future value function Bank1FV(CF, r, n) that reflects this policy. в с BANK1FV
A bank offers different interest rates on deposit accounts. The rate is based on the size of the periodical deposit ( CF ) and the following table. Write a future value function BankFV(CF, r, n).
Rewrite the function in exercise 2 as BetterNewPV(CF, r, n), so it could deal with n periods. А В с 1 BETTERNEWPV IN ACTION 2 CF D E BetterNewPV r n 5% =BetterNewPV(A3,B3,C3)
Write a function NewPV(CF, r) which calculates the present value of a given cash flow CF at interest rate r for 5 periods: NewPV(CF,r)= CF CF + CF CF CF (1+r)' ' (1+r)* ' (1+r)* ' (1+r)* ' (1+r)°
Write a VBA function that computes the n th number in the Fibonacci series; do not use recursion. A 1 Exercise 11 2 n LoopFibonacci 0
Fibonacci numbers are named after Leonardo Fibonacci (1170?1230), an outstanding European mathematician of the medieval period. Fibonacci numbers are defined as follows: Write a recursive VBA
Using the information provided in exercise 8 write a two-argument function DEP(DFV, Years) that will return the monthly contribution necessary to get a certain sum in the future (2, 3, 4, or 5
A bank offers the following saving scheme: Invest a fixed amount on the first of each month for a set number of years. On the first of the month after your last installment, you get your money plus
Implement a VBA function ChooseBond(Deposit, Years, FT0, FT1). The function will return the value 1 if the superior investment is the bank in exercise 5 or the value 2 if it is the company in
An investment company offers a bond linked to the FT100 index. On redemption the bond pays the face value plus the largest of A: the face value times the change in the index. Or B: 5% yearly interest
Using the function in exercise 4, implement a function NewDFV(Deposit, Years) . The function will return the future value of a deposit with the bank assuming the deposit and accrued interest is
A bank offers different yearly interest rates to its customers based on the size of the deposit in the following way:For deposits up to 1,000, the interest rate is 5.5%For deposits from 1,000 and up
Suppose a share was priced at price P 0 at time 0, and suppose that at time 1 it will be priced P1. Then the continuously compounded return is defined as return = In(P1/P0). Implement this function
Write a VBA function for f(x) = ?2x2 + 2x. Note that there are two ways to do this: The first is to use the VBA function Sqr. The second is to use the VBA operator ? ? ?. We suggest you try both. A
Write a VBA function for f(x) = x2 ? 3. A В 1 Exercise 1 2 3 Ix -2
Below you will find the variance-covariance matrix of six stocks. Use an array function to create a matrix with only variances on the diagonal and with zeros elsewhere. A В E G 1 GE MSFT JNJ K ВА
Use the array functions Transpose and MMult to multiply the row vector {1,2,3,4,5} times the column vector -9 7 6

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