5 questions will be shown from 30 free practice questions to prepare you for the CFA level 2 exam. Enjoy!
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1. In regard to calculating Wadgett’s FCFF, the comment that is most appropriate is the one dealing with:
. Cash flow from operations (CFO) already reflects changes in working capital items, therefore Paschel’s first comment is correct. EBITDA has the non-cash charges of depreciation and amortization added back, so Covey’s statement is incorrect, not all non-cash charges will need to be added back. Net borrowing is added back for FCFE not FCFF, so Paschel’s second statement is incorrect. . Depreciation has already been added back to EBITDA, though there may be other items that still need to be added back. . Adjusting for net borrowing is not necessary for FCFF (just FCFE).
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2. In sharing her research material with the subject companies, LeCompte most likely violated CFA Institute Research Objectivity Standards with respect to her report(s) on:
LeCompte violated Requirement 6, Relationships with Subject Companies, by sharing the full research report with NanoMem. Sharing any section of a research report that might communicate the analyst’s proposed recommendation, rating, or price target is prohibited by the Research Objectivity Standards. Sharing historical factual information, on the other hand, is not a violation. LeCompte shared with UniFlash management only the part of her report on UniFlash that provides factual information.
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3. Who makes the most accurate statement in regard to Wadgett’s current valuation?
. Covey’s statement is based on the idea that a firm’s stock price increases if it is the target of an acquisition (i.e., a control premium). Consequently, when the acqui- sition failed with no apparent future threat of a takeover, the stock price decreases as the control premium vanishes. . The subsidiary of a conglomerate generally has a value that is below its stand-alone value due to a conglomerate discount. . Pairs trading is a relative value strategy that does not consider the actual intrinsic value of a given firm.
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4. The most accurate interpretation of Whelan’s conclusions concerning the pre- and post-acquisition HHI is that they are:
An HHI greater than 1,800 indicates that an industry is highly concentrated. Should the HHI in a highly concentrated industry change by 50 or more, a governmental challenge to a particular business combination is very likely. In this instance, the industry is highly concentrated and the HHI changes by 90, making Whelan’s second conclusion incorrect. A government challenge is likely. Whelan’s second conclusion is not correct. Whelan’s conclusion that the industry is highly concentrated is correct.
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5. The mark-to-market value for Drawbridge’s forward position is closest to:
1 Drawbridge sold AUD 5 million forward to the settlement date at an all-in forward price of 0.8940 (USD/AUD). 2 To mark the position to market, Drawbridge offsets the forward transaction by buying AUD 5 million three months forward to the settlement date. 3 For the offsetting forward contract, because the AUD is the base currency in the USD/AUD quote, buying AUD forward means paying the offer for both the spot rate and forward points. I. The all-in three-month forward rate is calculated as 0.9066 – 0.00364 = 0.90296 II. This gives a net cash flow on settlement day of 5,000,000 × (0.8940 – 0.90296) = –USD44,800 (This is a cash outflow because Drawbridge sold the AUD for- ward and the AUD appreciated against the USD). 4 To determine the mark-to-market value of the original forward position, calculate the present value of the USD cash outflow using the three-month USD discount rate: –USD44,8000/[1 + 0.0023(90/360)] = –USD44,774. The present value of the cash flow was not calculated (step 4 of calculation). The cash flow was calculated using the bid rate instead of the offer rate. 1 The all-in three-month forward rate = 0.9062 – 0.00368 = 0.90252 2 This gives a net cash flow on settlement day of 5,000,000 × (0.8940 – 0.90252) = – USD42,600, and the present value is calculated as –USD42,600/[1 + 0.0023(90/360)] = –USD42,576.
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腦海中有大膽的想法嗎