Sample Question Paper for NCFM - Financial Modeling Certification

Transcription

Sample Question Paper for NCFM - Financial Modeling Certification
Sample Question Paper for NCFM - Financial Modeling Certification Duration: 2hrs
No Negative marking
Total Marks: 100
Grade A: Above 75 marks
Grade B: Between 60 and 75 marks
Grade C: Between 50 and 60 marks
Fail: Below 50
1. Which of the following statements is most accurate?
[1 Marks]
a) Law of supply says that demand of product falls as price of substitute decreases
b) Law of supply says that demand of product rises as price of substitute decreases
c) Law of demand says that demand of product falls as price of product falls
d) Law of demand says that demand of product rises as price of product falls
e) Not Attempted
2. Following are the details of an IT Company's revenue for the past 3 years - Year-1 = 11000, Year-2 = 13500,
Year-3=16000, million INR
35% of the revenue comes from onsite and remaining from offshore
The number of employees working onsite is 15% of the total employee strength every
year
The employee count for the company each year is 5000, 6000 and
7000
The onsite utilization is 85%, 85% and 85% in the respective
years
The offshore utilization has been 2000 bps lower than
onsite
Assuming that the onsite and offshore billing rates per hour increase at 2% per year, project the revenues for the next 3
years
Assume 250 working days per year and 8 hours of working for every Day
Company expects to add 500 employees every year.
15% of the total employees would be onsite, others offshore
Utilization rates are expected to remain constant, for both onsite and offshore as that in year3
What is the revenue for Year-6?
[10 Marks]
a) 18899
b) 20618
c) 23246
d) 16883
e) Not Attempted
3. Which of the following is a correct representation of formula in excel?
[1 Marks]
a)
=sum(AB)
b) =sum(A1;B1)
c) =sum(A1:B1)
d) =sum(A1B1)
e) Not Attempted
4. A company has a D/E of 1.25. As per the balance sheet, the outstanding debt is Rs.10000 bearing an interest rate of 10%
The cash and cash equivalent is Rs.1250
The net income of the company is Rs.1600 and the tax rate is
30%
The depreciation and amortization amount is Rs.500.
Calculate the EV/EBITDA of the company.
Consider the book value of equity same as the market value of equity of the
company.
[5 Marks]
a) 5.48
b) 4.42
c) 3.49
d) 2.48
e) Not Attempted
5. Which of the following is most accurate statement?
[1 Marks]
a)
b)
Demand Curve - Curve Sloping downward to right
Demand Curve - Curve Sloping upward to right
c) Demand Curve - A humped curve
d) None of the above
e) Not Attempted
6. Calculate the ROE of the company with the use of following information: EBIT = Rs.4000, Tax rate = 35%,
Interest rate =15%, Outstanding debt = Rs.10000, Equity value = Rs.20000.
[1 Marks]
a) 15%
b) 14%
c) 10%
d) 8%
e) Not Attempted
7. Which of the following is the most accurate statement regarding a Financial Model:
[1 Marks]
a)
b)
c)
d)
e)
Excel containing historical financial data
Basic calculation tool
A decision making tool
Excel spreadsheet with numbers
Not Attempted
8. Increase in government spending causes ______________ of private investment.
[1 Marks]
a)
Inflation
b) Unemployment
c) Money Supply
d) Crowding Out
e) Not Attempted
9. Following are the details of a manufacturing setup, you plan to establish. Total Investment of 35,000,000 needs
To be done for the project in the following phasing schedule - year-1 = 30%, year-2 = 20%, year-3=20%
And year-4 = 30%
Plant will operate for 5 years
During development funding to be arranged as 65% Debt @ 8% interest rate, to be repaid equally over
The 5 years of operations, at end of each year) and 35% equity (@15% cost of equity)
Funding should be assumed to have been raised throughout the period during development
(Fully depreciate the total project cost in 5 years using Straight Line Method)
During operations expected selling price is Rs.2500/unit with 12% y/y growth and cost price is Rs.500/unit with 5% y/y
Growth
Quantity sold is expected to be 6000 with 10% y/y growth
Working capital is expected to be 5% of sales and operating expenses are expected to be 25% of
sales
Tax rate is 30% and interest income rate is 7% (Compute the interest income on Beginning of period cash
balance)
Evaluate the proposal by building an FSA projection model and estimate the returns generated on the investment using
The IRR and the NPV techniques. What is the expected NPV for the given case?
(Compute the project NPV, i.e discounting should be done with WACC)
[10 Marks]
a) 1478523
b) 1147852
c) 1258963
d) 710142
e) Not Attempted
10. NOD Co a franchise of Dr. Reddyy pharmacy sells 250 strips/day of low budget drugs at an average contribution
Of Rs Rs.40/ strip and 150 strips/day of high budget drugs at an average contribution of Rs.70/ strip
Sales volume and average price are expected to grow by 5% every year for both the
drugs
To operate a franchise, it needs to have a 1250 sqft space for retail shop with a lease rental of Rs.175 / sqft / month
(Rental contract for 5 years, deposit of Rs.15,00,000 at the start)
A One time renovation of the premises worth Rs.30,00,000 will need to be incurred at the start.
Required personnel Costs are Rs 125,000/month
Wage inflation in the economy is 8%. Other operational expenses are expected to be 30% of the contribution,
Generated for the period
Tax rate in the economy is 35%. Tax losses cannot be carried
forward
The initial investment (deposit + renovation) can be funded by 60% bank loan (@13% interest rate).
The remaining should funded using equity.The debt is to be repaid at the end of 5 years in lump sum
Other investment opportunity with NOD Co. is expected to provide a return of
25%
Evaluate the business opportunity with a project life of 5
years
After 5 years the franchise will be handed over to Dr. Reddyy and the deposit will be refunded to the NOD Co.
(Ignore depreciation) If NOD Co. invests in the project, what is the expected IRR?
[10 Marks]
a) 48.74%
b) 19.74%
c) 34.15%
d) 21.74%
e) Not Attempted
11. _______ is a market structures in which there exists a single seller, and single buyers.
[1 Marks]
a) Oligopoly
b) Monopoly
c) Monopsony
d) Duopoly
e) Not Attempted
12. Which amongst the following are applications of a financial model?
[1 Marks]
a)
b)
c)
d)
e)
Merger Valuation
Project Appraisal
Equity Research
All of the above
Not Attempted
13. Following are the details of revenues from 2 segments for a company
Segment-1: Year-1 = 2700, Year-2 = 3500, Year-3 = 4700
Segment-2: Year-1 = 1200, Year-2 = 1400, Year-3 = 1800
Both segments have worked at a gross margin of 25% for segment-1 and 10% for segment-2 for all the 3
years
The selling and administration expenses have remained at 20% of the revenues for each
year
The company additionally has a debt of 3400 since Year-1 to Year-3, which has an interest rate of
9%
Debt will be repaid at the end of 5 years. Company has fixed assets of 5500 for all 3
years
These were depreciated at 5% each year and new assets worth the same amount were added each
year
The tax rate for the company is 35%.Complete the Income statement of the company based on
The given data and Compute the Net Profit for the year-3
Don't assume any interest income.
Tax losses if any, are not carried forward.
[10 Marks]
a) -990
b) -390
c) -1000
d) -595
e) Not Attempted
14. Mr.XYZ has purchased a car by borrowing a loan of Rs.650000 bearing an interest rate of 12% per annum for 7 years.
What would be EMI amount? The interest rate on the loan is compounded monthly and that the
EMI is paid at the beginning of the month.
[1 Marks]
a)
b)
c)
d)
e)
Rs. 10,915.18
Rs. 11,820.40
Rs. 12,642.26
Rs. 11,360.67
Not Attempted
15. What is the acid test ratio ratio of company which has current asset worth 20 mn, current liability worth 10 mn and
Inventory worth 5 mn?
[1 Marks]
a)
b)
c)
d)
e)
2.1
2
1.5
2.5
Not Attempted
16. Current cash flow details of the company are as provided
Use these assumptions to estimate the FCFE for current
period
Project the cash flows based on a 2 stage FCFE model and compute the Intrinsic Value per share as per the FCFE
model
And compute the Intrinsic Value per share as per the FCFE model
Current period should not be considered for the valuation
purpose
EBITDA for the company is 1500
Company has charged a depreciation of 300 in the current
year
Company has a debt of 1500 at 10% interest rate. The tax rate of the company is
20%
During the year the company added new machinery worth 100 and working capital reduced by
50
Debt raised during the year was 150 and repaid was 275
Cost of equity for the company is 20%
Number of shares with the company are 500
The company's FCFE is expected to increase by 15% for the next 5 years and then expected to
Remain constant at 5% forever
[5 Marks]
a) 12.65
b) 11.66
c) 19.43
d) 10.65
e) Not Attempted
17. Following is the selected financial data of a Services Company provided to the analyst
Year - 1 (Y1) is actual data and year-2 (Y2) and year-3 (Y3) are
projections
Income Statement forecast details are as follows: Revenue Projection: Y1 = 9000, Y2=10000, Y3 =
11000
COGS Projection Y1 = 6000, Y2 = 7250 , Y3 = 8900
Depreciation: Y1 = 700, Y2 = 800, Y3 = 900 ; Tax : Y1 = 500, Y-2 = 650, Y3=700
No other item is present in the Income Statement
Balance Sheet forecast details are as follows: Cash: Y1 = 4800, Y2 = 5309.7, Y3 = 5019.4, Accounts receivable:
Y1 = 2500, Inventory: Y1 = 3000, PPE, Net : Y1 = 9000, Accounts payable : Y1 = 1500,
Debt: Y1 = 7500,Y2 = 7500, Y3 = 7500, Equity : Y1 = 7500, Y2= 7500, Y3=7500,
Retained earnings: Y1 = 2800
No other line items are present in the balance sheet
DSO, DOH and Payable days are expected to remain the same for all the projection years as that of
year-1
Every year the company is going to add 1000 of new capex
Assume new capex gets added at the start of the year and its depreciation is considered in the above given
values
What is the total Liabilities and Shareholders' Equity for the Year 3?
[10 Marks]
a) 25874
b) 29514
c) 24325
d) 21825
e) Not Attempted
18. Current cash flow details of the company are as provided
Use these assumptions to estimate the FCFF for current period. Project the cash flows based on a 3 stage FCFF model
and compute the Intrinsic Value per share as per the FCFF model
Current period should not be considered for the valuation
purpose
Net Income for the company is 550, Tax rate is 35% and there is a debt on the books of the company worth 5000 at 8%
Interest rate
Depreciation charged during the current period is 125 and the capex done by the company is
225
Working capital decreased by 50 during the current year
No additional borrowings or repayment was done by the
company
The company's total shareholders' equity is 12000 and the cost of equity is
15%
Company's FCFF is expected to grow at 10% for the next 3 years, then linearly decline to 5% in the next 5 years and
Remain costant at 5% forever
Company is not having any cash on its books
Number of shares with the company are 500.
[5 Marks]
a) 17.52
b) 12.18
c) 20.18
d)
e)
18.19
Not Attempted
19. Calculate present value of annual infinite cash inflow of Rs 10,000 if rate of interest is 8.00%.
[1 Marks]
a) 150000
b) 145000
c) 160000
d) 125000
e) Not Attempted
20. A company has a beta of 1.5. The risk free rate is 3% and market return is 9%. Calculate the cost of equity?
[1 Marks]
a) 11%
b) 12%
c) 13%
d) 9%
e) Not Attempted
21. A company has a beta of 1.15. The risk free rate is 4% and market return is 8%. Calculate the cost of equity?
[1 Marks]
a) 7.45%
b) 4.60%
c) 7.60%
d) 8.60%
e) Not Attempted
22. For a year, a company has an payable turnover ratio of 9. The accounts payable for the year is 7mn and the accounts
Payable for the previous year was 5mn. Calculate the cost of goods sold of the company for the current period?
[1 Marks]
a) 34mn
b) 45mn
c) 38mn
d) 54mn
e) Not Attempted
23. Which of the following is most accurate?
[1 Marks]
a)
b)
c)
d)
e)
Supply Curve - Curve Sloping downward to right
Supply Curve - Curve Sloping upward to right
Supply Curve - A humped curve
None of the above
Not Attempted
24. What is the acid test ratio of company which has current asset worth 25 mn, current liability worth 20 mn and
Inventory worth 5 mn?
[1 Marks]
a)
b)
c)
d)
e)
1.75
1.5
1
2
Not Attempted
Correct
25. For non conventional cash flows, which of the following capital budgeting criteria should be preferred?
[1 Marks]
a) NPV
b) IRR
c) Payback Period
d) None of the above
e) Not Attempted
26. Calculate the depreciation amount to be charged per year using the straight line depreciation method, if the cost of
An asset is Rs.16000 and the salvage value is Rs.1000. The useful life of the asset is 5 years.
[1 Marks]
a) Rs. 3,000
b) Rs. 1,500
c) Rs. 4,500
d) Rs. 1,000
e) Not Attempted
27. Given below are the details of Income Statement and Balance sheet of a company.
Compute Ending cash balance for the company
Income Statement Details: Revenue =1050, COGS = 600, SG&A is 15% of Revenues,
Depreciation=50, Debt=500 and interest rate is 10%, Tax Rate is 30%
Balance Sheet Details: PPE, Gross = 2000, Accumulated Depreciation=1250,
Capex done by the company = 99.75, Current Assets = 750, Decrease in current assets = 240.
Equity = 100, Retained Earning = 1500, Current Liabilities = 250, Increase in current liabilities=25
The company started the year with cash=0. Debt and equity has remained unchanged throughout the
year.
[10 Marks]
a) 650
b) 450
c) 350
d) 550
e) Not Attempted
28. during a period of steadily increasing prices which of the following methods of measuring the inventory is likely
To result in the lowest gross profit?
[1 Marks]
a)
Weighted Average Method
b) FIFO Method
c) LIFO Method
d) Average Method
e) Not Attempted
29. Calculate the present value (PV) following cash flow with a discount rate of 10%: 100,200,450,650. Assume the first
Cash flow comes at the end of the first year and the other cash flows come after that with an equal interval of 1 year.
[1 Marks]
a) 1050.45
b) 1340.45
c) 1224.64
d) 1,038.25
e) Not Attempted
30. Company ABC Ltd. is a Services company
The operating profit of the company is Rs.1500 mn
The outstanding debt of the company is Rs.5500 mn bearing an interest rate of
15%
The tax rate is 30%
The dividend rate is 45%
The numbers of outstanding shares are 55
mn
Currently the stock is trading at Rs.75
Calculate the P/E ratio of the company.
[5 Marks]
a) 4.13
b) 8.73
c) 2.13
d) 6.13
e) Not Attempted
Answer key:
1
2
3
4
5
6
7
8
9
10
D
B
C
B
A
D
C
D
D
C
11
12
13
14
15
16
17
18
19
20
D
D
D
D
C
C
D
A
D
B
21
22
23
24
25
26
27
28
29
30
D
D
B
C
A
A
C
C
D
B