Examen 2. Etapa 2 Equity

Novacastle Corp. has a market value of equity of $800 million and market value of debt of $300 million, and holds $50 million of cash and cash equivalents. Its trailing EBITDA is $175 million. Novacastle’s enterprise value (EV) and EV/EBITDA multiple are closest to:

Which of the following is an advantage of using EV/EBITDA rather than the P/E ratio to value a firm with substantial financial leverage?

Blume Materials trades at $45 per share with book value per share of $30. A competitor, Sato Metals, trades at $24 per share on sales per share of $16. The price-to-book (P/B) of Blume and the price-to-sales (P/S) of Sato are, respectively, closest to:

An analyst is choosing how to model operating costs for a heavy manufacturer with large fixed plant and high operating leverage. The most appropriate modeling choice is to:

When evaluating the construction of a forecast model for a young, high-growth software firm with negative current earnings, an analyst would most appropriately:

An analyst models a consumer-staples company whose sales are highly seasonal and whose working capital swings sharply within the year. To capture this, the analyst should most appropriately:

The distinction between cyclical and non-cyclical (defensive) companies is most useful because it reflects:

An industry’s total revenue has grown at an average annual rate of 12% over the past five years, well above nominal GDP growth, while several new entrants have appeared. This pattern is most consistent with an industry in the:

Over three years, Company X’s revenue grew 6% annually while its industry’s total revenue grew 10% annually. Regarding Company X’s market share, this most likely indicates that its share:

Coastline Retail reports revenue of USD 800 million and cost of goods sold of USD 520 million. Its gross profit margin is *closest* to:

Aurora Beverages generated revenue of USD 500 million and operating income (EBIT) of USD 90 million. Its operating profit margin is *closest* to:

Analyzing revenue drivers for a subscription software firm, an analyst decomposes growth into changes in the number of subscribers and changes in average revenue per subscriber. If subscriber count grows 8% while average revenue per subscriber falls 3%, total revenue growth is *closest* to:

Which statement *best* distinguishes sell-side from buy-side equity research?

A buy-side analyst and a sell-side analyst cover the same company. Compared with the sell-side report, the buy-side analyst’s conclusions are *most likely* to be:

Two analysts value the same company using an identical discounted cash flow framework but arrive at intrinsic values of USD 48 and USD 62. This difference is *most likely* explained by:

An analyst notes that the CAPM required return for a firm depends on the risk-free rate, the firm’s beta, and the equity risk premium. Holding beta and the risk-free rate constant, an increase in the equity risk premium will cause the required return on equity to:

Arbitrage pricing theory (APT) differs from the CAPM primarily in that APT:

Under a two-factor APT model, a stock’s expected return is Rf + b1 x (factor 1 premium) + b2 x (factor 2 premium). Given Rf = 3.0%, b1 = 0.8 with a factor-1 premium of 2.0%, and b2 = 1.5 with a factor-2 premium of 1.2%, the expected return is *closest* to:

Within Porter’s Five Forces framework, a large number of readily available close substitute products for an industry’s output most directly:

An analyst performs sensitivity analysis on a forecast model and finds that the estimated equity value changes substantially with small changes in the assumed long-term growth rate. This result is best interpreted as indicating that:

An analyst notes that Halden PLC currently trades at a trailing P/E of 11.0, whereas its own average trailing P/E over the past ten years is 15.0, and the median trailing P/E of its peer group today is 14.5. Assuming fundamentals are otherwise unchanged, this most likely suggests that Halden is: