luckygiftvn

An analyst gathered the following data for TRK Construction [all amounts in Swiss francs (Sf)]:

Recent share price	Sf 30.00
Shares outstanding	Sf 40 million
Market value of debt	Sf 120 million
Cash and marketable securities	Sf 75 million
Investments	Sf 200 million
Net income	Sf 160 million
Interest expense	Sf 9 million
Depreciation and amortization	Sf 12 million
Taxes	Sf 48 million

The EV/EBITDA multiple for TRK Construction is closest to:

A) 3.47x.

B) 4.56x.

C) 5.21x.

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EBITDA = (net income + interest + taxes + depreciation / amortization)EV = (market value of common stock + market value of debt – cash and investments)
EBITDA = 160 + 9 + 12 + 48 = Sf 229 million
EV = (30 × 40) + 120 – 75 – 200 = Sf 1045 million
EV / EBITDA = 4.56

luckygiftvn

An analyst gathered the following data for TRK Construction [all amounts in Swiss francs (Sf)]:

Recent share price	Sf 22.00
Shares outstanding	40 million
Market value of debt	Sf 140 million
Cash and marketable securities	Sf 55 million
Investments	Sf 300 million
Net income	Sf 140 million
Interest expense	Sf 7 million
Depreciation and amortization	Sf 10 million
Taxes	Sf 56 million

The EV/EBITDA ratio for TRK Construction is closest to:

A) 3.12x.

B) 2.52x.

C) 3.49x.

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EBITDA = (net income + interest + taxes + depreciation / amortization)
EV = (market value of common stock + market value of debt – cash and investments)
EBITDA = 140 + 7 + 10 + 56 = Sf 213 million
EV = (22 × 40) + 140 – 55 – 300 = Sf 665 million
EV / EBITDA = 3.12

luckygiftvn

Which of the following are advantages of using EV/EBITDA?

A) If working capital is growing, EBITDA will be larger than CFO.

B) EBITDA is useful for valuing capital-intensive businesses with high levels of depreciation and amortization.

C) EV/EBITDA ignores how different revenue recognition policies affect CFO.

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EBITDA is useful for valuing capital-intensive businesses with high levels of depreciation and amortization. The other statements are disadvantages to using EV/EBITDA.

luckygiftvn

Which of the following is a disadvantage to using EV/EBITDA?

A) Since FCFF captures the amount of capital expenditures, it is more strongly linked with valuation theory than EBITDA.

B) EBITDA is useful for valuing capital-intensive businesses with high levels of depreciation and amortization.

C) EBITDA is usually positive even when EPS is not.

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Since FCFF captures the amount of capital expenditures, it is more strongly linked with valuation theory than EBITDA. The other statements are advantages.

luckygiftvn

An analyst gathered the following data for TRK Construction [all amounts in Swiss francs (Sf)]:

Recent share price	Sf 25.00
Shares outstanding	40 million
Market value of debt	Sf 130 million
Cash and marketable securities	Sf 65 million
Investments	Sf 250 million
Net income	Sf 150 million
Interest expense	Sf 8 million
Depreciation and amortization	Sf 11 million
Taxes	Sf 52 million

The EV/EBITDA multiple for TRK Construction is closest to:

A) 2.47x.

B) 4.12x.

C) 3.69x.

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EBITDA = (net income + interest + taxes + depreciation / amortization)
EV = (market value of common stock + market value of debt – cash and investments)
EBITDA = 150 + 8 + 11 + 52 = Sf 221 million
EV = (25 × 40) + 130 – 65 – 250 = Sf 815 million
EV / EBITDA = 3.69

luckygiftvn

Which of the following factors is a source of differences in cross-border valuation comparisons?

A) Intra-country market indicators.

B) Comparative advantage.

C) Accounting methods.

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Different accounting conventions make cross-border comparisons for valuation purposes challenging.

luckygiftvn

Which of the following price multiples is most severely damaged by international accounting differences?

A) Price to cash flow from operations (P/CFO).

B) Price to free cash flow to equity (P/FCFE).

C) Enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA).

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EV/EBITDA is the most seriously affect because it is most closely tied to accounting conventions

luckygiftvn

Which of the following factors is NOT a source of differences in cross-border valuation comparisons?

A) Intra-country market indicators.

B) Cultures.

C) Growth opportunities.

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Intra-country market indicators are not, by definition, cross-border.

luckygiftvn

Which of the following is a common momentum valuation indicator?

A) Dividend yield (D/P).

B) Price to free cash flow to equity (P/FCFE).

C) Relative strength.

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Relative strength is generally considered a momentum valuation indicator.

luckygiftvn

Which of the following is NOT a common momentum valuation indicator?

A) Earnings surprise.

B) Dividend yield.

C) Relative strength.

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Dividend yield is not generally considered a momentum valuation indicator.