CFA Level 1 － Mock Exam 2 模拟真题－Q81-85 class, black, style, face

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81、Chenchell's India Trading Co. (CITC), an importer-exporter of specialty goods and garments, has operations in Asia, Europe, and North America. Marc Twinsing, CFA, a balanced fund manager, is considering adding CITC's stock to his portfolio and he has compiled the following information:

	CITC	Industry Average
Weighted average cost of capital (WACC)	14%	12%
Return on Assets (ROA)	20%	15%
Dividend Yield	0%	1.2%
Consensus estimate of stock’s value	$53	N/A
Current price of CITC’s stock	$50	N/A

Based on his analysis Twinsing's most likely conclusions about the company and its stock, respectively, would be:

	that CITC company is a:	that CITC’s stock is a:
A.	growth company	growth stock
B.	growth company	speculative stock
C.	speculative company	growth stock
D.	speculative company	speculative stock

Select exactly 1 answer(s) from the following:

A. AnswerA.

B. AnswerB.

C. AnswerC.

D. AnswerD.

 

82、Which of the following is the least accurate rationale to justify the use of price-to-book value (P/BV) ratio as a measure of relative valuation of companies or common stocks?

Select exactly 1 answer(s) from the following:

A. P/BV is helpful in valuing companies experiencing negative earnings per share.

B. P/BV is a useful measure of value for firms that are not expected to continue as a going concern.

C. P/BV correctly reflects a company's value as the book value is based on the historical purchase costs of assets.

D. P/BV is particularly appropriate to value companies primarily composed of liquid assets, for example, those in the financial services industry.

 

83、Metiu Metev, an analyst with Sofia Equity Researchers, has gathered the following information about Balkan Steel Mills (BSM):

Current year’s operating free cash flow	BGN 5 million
Cost of equity capital	15%
Weighted average cost of capital	12.4%
Estimated long-term growth rate	6%

Given this information, Metev's best estimate of BSM's intrinsic value (in BGN millions) would be closest to:

Select exactly 1 answer(s) from the following:

A. 55.56 million.

B. 58.89 million.

C. 78.13 million.

D. 82.81 million.

 

84、Geo Telecommunications Inc. is a fast growing company with a double-digit growth rate that is expected to continue for three more years. In his pursuit of valuing the company's stock, Dimiter Nenkov, a free-lance equity analyst, has compiled the following data about the company:

Current year’s free cash flow to equity

 

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答案和详解如下：

81 Correct answer is A

“Company Analysis and Stock Valuation,” Frank K. Reilly and KeithC. Brown
2008 Modular Level I, Vol. 5, pp. 150-152
Study Session 14-59-a
differentiate between 1) a growth company and a growth stock, 2) a defensive company and a defensive stock, 3) a cyclical company and a cyclical stock, 4) a speculative company and a speculative stock, and 5) a value stock and a growth stock
CITC is a growth company because its spread between ROA and WACC is larger than the industry average and its dividend yield is 0% compared to the industry average of 1.2%. CITC’s stock is a growth stock considering its under-valuation. A speculative stock, on the other hand, would be overvalued.

 

82 Correct answer is C

“Introduction to Price Multiples,” JohnD. Stowe, Thomas R. Robinson, Jerald E. Pinto, and Dennis W. McLeavey
2008 Modular Level I, Vol. 5, pp. 211-212
Study Session 14-61-a
discuss the rationales for, and the possible drawbacks to, the use of price to earnings (P/E), price to book value (P/BV), price to sales (P/S), and price to cash flow (P/CF) in equity valuation
The historical cost basis of assets in P/B ratio is a drawback not a rationalization for using it as a measure of relative valuation.

 

83 Correct answer is D

“An Introduction to Security Valuation: Part II,” Frank K. Reilly and Keith
C. Brown
2008 Modular Level I, Vol. 5, pp. 180-181, 184
Study Session 14-60-b, f
calculate and interpret the value both of a preferred stock and a
common stock using the dividend discount model (DDM);
describe a process for developing estimated inputs to be used in the DDM, including the required rate of
return and expected growth rate of dividends
V = OFCF1 / (WACC - g) = 5 (1.06) / (0.124 - 0.06) =
82.81

 

84 Correct answer is A

“An Introduction to Security Valuation: Part II,” Frank K. Reilly and KeithC. Brown
2008 Modular Level I, Vol. 5, pp. 182-185
“Understanding the Cash Flow Statement,” Thomas R. Robinson, Hennie van Greuning, Elaine Henry, and MichaelA. Broihahn
2008 Modular Level I, Vol. 3, pp. 287-288
Study Session 14-60-b, f; 8-34-i
calculate and interpret the value both of a preferred stock and a common stock using the dividend discount model (DDM);
describe a process for developing estimated inputs to be used in the DDM, including the required rate of return and expected growth rate of dividends; explain and calculate free cash flow to the firm, free cash flow to equity, and other cash flow ratios

 

85 Correct answer is C

“Introduction to Price Multiples,” JohnD. Stowe, Thomas R. Robinson, Jerald E. Pinto, and Dennis W. McLeavey
2008 Modular Level I, Vol. 5, pp. 213-215
Study Session 14-61-b
calculate and interpret P/E, P/BV, P/S, and P/CF
BV per share = 4m shares (1.50) + $20 m + $5 m - $10 m = $21 m / 3.5 m sh. = $6.00
Price-to-book value = $21 / $6.00 = 3.50

 

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