DCF and Relative Valuation Quiz

What is the primary objective of a DCF analysis?

• Determine a company's market share

• Estimate the intrinsic value of a company

• Compare a company to its peers

• Calculate current liabilities

Which of the following is most often used as the discount rate in DCF calculations?

• Cost of Equity

• Risk-Free Rate

• Weighted Average Cost of Capital (WACC)

• Inflation Rate

In a DCF analysis, which cash flows are typically used?

• Free Cash Flow to Equity (FCFE)

• Free Cash Flow to Firm (FCFF)

• Operating Cash Flow

• Net Income

Which terminal value calculation method is commonly used in DCF?

• Comparable Company Analysis

• Gordon Growth Model

• PE Ratio Multiples

• Dividend Discount Model

If a company's WACC increases, what happens to the estimated value in a DCF analysis?

• It increases

• It remains unchanged

• It decreases

• It cannot be determined

Which of the following metrics is commonly used in relative valuation?

• Net Present Value (NPV)

• Payback Period

• Price-to-Earnings (P/E) Ratio

• Internal Rate of Return (IRR)

What is the main principle behind relative valuation?

• A company is worth the present value of its future cash flows

• A company's value should be based on the book value of its assets

• A company's value can be estimated by comparing it to similar companies

• A company's value is always stable

If a company has a lower P/E ratio than its peers, what might that indicate?

• It is undervalued

• It has higher growth potential

• It is overvalued

• It has lower risk

Which valuation method would you prefer for a high-growth tech company with unpredictable cash flows?

• Discounted Cash Flow (DCF)

• Price-to-Earnings (P/E) Ratio

• Enterprise Value-to-EBITDA (EV/EBITDA)

• Price-to-Book (P/B) Ratio