Rift Valley University, Woliso Campus, College of Business and Economics
Department of Accounting and Finance
Financial Modeling- Mid-Exam
Year: IV Sem.: I Academic Year: 2024/2025 Program: Regular
Time Allowed: 50’ Maximum marks: 30%
Name: _________________________________________________ [Link]: ______________
Part I: Write True if the statement is correct and write false if the statement is wrong. (1 pt each)
1. A financial model is helps businesses forecast future financial performance by simulating the
impact of various variables and scenarios.
2. Financial models provide clarity on the expected cash inflows and outflows.
3. The primary purpose of business valuation is preparing a company for sale.
4. Efficient market allows investors an opportunity to out-perform.
5. FCF is an attempt to measure the cash produced by the business activity of the firm.
6. Market Capitalization is the product of Current Price of Share and Outstanding paid up
equity shares.
7. The Outstanding Debt is the sum of Bank Loans and Corporate Bonds
Part II: Choose the correct answer from the given alternative. (1.5pt each)
1. What is Financial Model used for?
A. Valuation of a Company C. Valuation of an Asset,
B. Pricing Strategies D. Restructuring Situations E. All
2. Who builds Financial Models?
A. Equity Research Analysts C. Credit Analysts
B. Risk Analysts D. All E. None of the above
3. Who builds Financial Models?
A. Investors B. Risk Analysts C. Data Analysts D. All E. None
4. Mr. Wako has invested the Br.100 in 2016. The payment has been made yearly. The
interest rate is 10%. What would be the FV in 2019?
A. Br. 150.02 B. Br. 10.5 C. Br. 100.12 D. Br. 146.4 E. N
5. Which skills are required to be a successful financial modeling expert?
A. Excellent Excel Skills B. Knowledge about Accounting, Finance, and Valuation
B. Problem Solving Ability D. Decision-Making Ability
6. Which of the following the most widely used method of valuation in the finance industry?
A. Statement Financial Modeling
B. Discounted Cash Flow Model
A. Leveraged Buyout (LBO) Model
C. Merger and Acquisition Model
Q7-What is the typical variation in IRR based on the year of exit?
A. Maintains its value throughout the investment horizon
B. Decreases as a result of slowing growth rates as well as the time value of
money
C. Continues to grow indefinitely
Q1. Calculate the discount factor for the 4th year to determine the net present value of cash flow
if the discount rate is 6.5%
a) 0.93
b) 0.88
c) 0.82
d) 0.77
Q2. Calculate the net present value of Rs 1000.00 for the 4th year with a discount rate of
7.15%.
a) Rs 758.63
b) Rs. 933.27
c) Rs 870.99
d) Rs 812.87
Q3. The additional funding required the fill the mismatch between current assets
and current liabilities is called _____________
a) Spread
b) Basis
c) Plug
d) Loan
Q4. Which of the following is a source of working capital for a corporate institution?
a) Treasury bills
b) Commercial paper
c) Certificate of deposits
d) Swaps
Q5. With an initial outflow of Rs. 1000.00, a company over the next 4 years earns Rs. 500, Rs
400, Rs 300 and Rs 100 with a discount rate 10%. Calculate the discounted pay-back period.
a) 2.33
b) 3.33
c) 2.95
d) 3.87
Q6. An investment at time 0 is worth Rs 15000 and Rs 23000 at the end of 5 years. Calculate the
compounded annual growth rate.
a) 8.92%
b) 9.14%
c) 8.29%
d) 6.89%
Q7. _______________ is the discount rate which equated the present value of all future cash
inflow to the present value of cash outflow
a) Net present value
b) Internal rate of return
c) Modified internal rate of return
d) Risk free rate
Q8. _______________ is ensure that the firm is able to continue its operations and has sufficient
cash flow to satisfy both maturing short-term debts and upcoming operational expenses
a) Debt servicing management
b) Working capital management
c) Asset allocation management
d) Cost accounting management
Q17. As per the Dividend discount model of equity valuation, the rate of return required by the
equity investor can be estimated using which of the following –
a) CAPM
b) Market interest rate
c) MIBOR
d) Firm’s IRR
Q18. Using the Gordon’s dividend discount model, calculate the fair value of the stock with
dividend at Rs 5.20, firm growth rate at 6% and required rate of return at 7%.
a) Cannot be determined
b) Rs 551.20
c) Rs 618.20
d) Rs 515.20
Q19. _____________ refers to performance of portfolio outside of market risks. It refers to the
value creation which is outside the scope of every known market risk and unknown
(diversifiable) risk factors.
a) Non-systematic risk
b) Systematic risk
c) Alpha of an econometric model
d) Both systematic and non-systematic risk
Q20. Enterprise value of the firm can be obtained by taking the sum of (i) current assets, present
value of forecasted free cash flow and ______________
a) Present value of the terminal value of free cash flow into perpetuity
b) Terminal value of free cash flow in perpetuity
c) Just the present value of forecasted free cash flow
d) Present market capitalization of the firm
Q21. Enterprise value of the firm can be obtained by _________________
a) Taking the book value of the firm
b) Taking the market capitalization of the firm
c) Subtracting the book value from the market value
d) Taking the market value of company’s assets and liabilities
Q22. _______________ is the value of a business or project beyond the forecast period when
the future cash flow can be estimated.
a) Enterprise value
b) Terminal value
c) Book value
d) Financial valuations
Q23. _______________ is the cash that a company has left after it pays for any capital
expenditures it makes.
a) Contingency budget
b) Petty cash
c) Free cash flow
d) Working capital
Q24. A ______________ is a reduction in taxable income for an individual or corporation
achieved through claiming allowable deductions such as mortgage interest, medical
expenses, charitable donations, amortization, and depreciation.
a) Tax rebate
b) Advanced tax
c) Tax shield
d) Tax deducted at source
Q25. _______________ is the process of creating a summary of a company's expenses and
earnings in the form of a spreadsheet that can be used to calculate the impact of a future event or
decision.
a) Project finance
b) Time value of money
c) Discounted cash flow
d) Financial modeling
1. Assume ABC Company has share outstanding 2,000,000, current share price in Br. 3, total
debt in Br. 3,000,000 and total cash Br. 1,000,000 then the enterprise value (EV) _________
A. Br. 2,000,000 B. Br. 6,000,0000 C. Br. 8,000,000 D. Br 4,000,000 E. None
2. How much will have to be deposited in a fund at the end of each year at 8% composed
annually to pay off at debt of Br. 50,000in five year?
A. Br. 50,000 B. Br. 8,500 C. Br. 8,703 D. Br. 8,700 E. None
1. Part III. Matching the following column “A” with column “B” statements
A B
1 Statement of financial A Determine the amount of profit that can be generated from a
modeling deal
2 Discounted cash flow model B Cash Balance + Fixed Deposit & Current Account Deposits
3 Leveraged Buyout model C Time value of money and widely used method of valuation
4 Merger and acquisition D Determine the effect on the earning per share of newly
model formed company
5 Network Capital E Statement of profit/loss, financial position and cash flow
Part III: Short answer item (5 pts)
1. Discuss about referring to corporation valuation
2. Explain the types of financial statements.
3. Calculating Apple Inc. EV through Balance sheet Model (in Millions)
Current Market Price 225.74
No of Equity shares 4,754.99
Commercial paper 11,964
Long-term borrowings 102,519
Cash and Equivalent 25,913
Rift Valley University, Woliso Campus, College of Business and Economics
Department of Accounting and Finance
Financial Modeling- Mid-Exam
Year: IV Sem.: I Academic Year: 2024/2025 Program: Extension
Time Allowed: 50’ Maximum marks: 30%
Name: _________________________________________________ [Link]: ______________
Part I: Write True if the statement is correct and write false if the statement is wrong. (1 pt each)
1. A financial model is helps businesses forecast future financial performance by simulating
the impact of various variables and scenarios.
2. Financial models provide clarity on the expected cash inflows and outflows.
3. The primary purpose of business valuation is preparing a company for sale.
4. Efficient market allows investors an opportunity to out-perform.
5. FCF is an attempt to measure the cash produced by the business activity of the firm.
6. Market Capitalization is the product of Current Price of Share and Outstanding paid up
equity shares.
7. The Outstanding Debt is the sum of Bank Loans and Corporate Bonds
Part II: Choose the correct answer from the given alternative. (1.5pt each)
1. What is Financial Model used for?
C. Valuation of a Company C. Valuation of an Asset,
D. Pricing Strategies D. Restructuring Situations E. All
2. Who builds Financial Models?
C. Equity Research Analysts C. Credit Analysts
D. Risk Analysts D. All E. None of the above
3. Mr. Wako has invested the Br. 100 in 2016. The payment has been made yearly. The
interest rate is 10% p.a. What would be the FV in 2019?
A. Br. 150.02 B. Br. 10.5 C. Br. 100.12 D. Br. 146.4 E. N
4. Which skills are required to be a successful financial modeling expert?
A. Knowledge about Accounting, Finance, and Valuation C. Excellent Excel Skills
B. Problem Solving Ability D. Decision-Making Ability E. All
5. Which of the following the most widely used method of valuation in the finance
industry?
A. Statement Financial Modeling C. Discounted Cash Flow Model
B. Leveraged Buyout (LBO) Model D. Merger and Acquisition Model E. All
6. The additional funding required the fill the mismatch between current assets
and current liabilities is called _____________
A. Spread B. Basis C. Plug D. Loan E. None
7. Which of the following is a source of working capital for a corporate institution?
A. Treasury bills B. Commercial paper C. Certificate of deposits D. Swaps
8. _______________ is the discount rate which equated the present value of all future cash
inflow to the present value of cash outflow
A. Net present value C. Internal rate of return
B. Modified internal rate of return D. Risk free rate E. None
9. _______________ is ensure that the firm is able to continue its operations and has
sufficient cash flow to satisfy both maturing short-term debts and upcoming operational
expenses
A. Debt servicing management C. Working capital management
B. Asset allocation management D. Cost accounting management E. None
10. Enterprise value of the firm can be obtained by taking the sum of current assets, present
value of forecasted free cash flow and ______________
A. Present value of the terminal value of free cash flow into perpetuity
B. Terminal value of free cash flow in perpetuity
C. Just the present value of forecasted free cash flow
D. Present market capitalization of the firm E. None
11. . Enterprise value of the firm can be obtained by _________________
A. Taking the book value of the firm
B. Taking the market capitalization of the firm
C. Subtracting the book value from the market value
D. Taking the market value of company’s assets and liabilities
12. ______ is the value of a business or project beyond the forecast period when the future
cash flow can be estimated.
A. Enterprise value C. Terminal value
B. Book value D. Financial valuations E. None
13. _______________ is the cash that a company has left after it pays for any capital
expenditures it makes.
A. Contingency budget B. Petty cash C. Free cash flow D. Working capital
14. A ______________ is a reduction in taxable income for an individual or corporation
achieved through claiming allowable deductions such as mortgage interest,
medical expenses, charitable donations, amortization, and depreciation.
A. Tax rebate B. Advanced tax C. Tax shield D. Tax deducted at source
15. _______________ is the process of creating a summary of a company's expenses and
earnings in the form of a spreadsheet that can be used to calculate the impact of a future
event or decision.
A. Project finance C. Time value of money
B. Discounted cash flow D. Financial modeling E. None
16. Assume ABC Company has share outstanding 2,000,000, current share price in Br. 3,
total debt in Br. 3,000,000 and total cash Br. 1,000,000 then the enterprise value (EV) _
A. Br. 2,000,000 B. Br. 6, 000,000 C. Br. 8,000,000 D. Br 4,000,000
17. How much will have to be deposited in a fund at the end of each year at 8% composed
annually to pay off at debt of Br. 50,000in five year?
A. Br. 50,000 B. Br. 8,500 C. Br. 8,703 D. Br. 8,700 E. None
2. Part III. Matching the following column “A” with column “B” statements
A B
1 Market Capitalization A Current Price of Share X Outstanding paid up equity shares
2 Preferred stock B Cash Balance + Fixed Deposit & Current Account Deposits
3 Outstanding Debt C Par value X Outstanding number of paid up equity shares
4 Minority Interest D Need to find out
5 Network Capital E Bank Loans + Corporate Bonds