6.Synergy from mergers and acquisitions 10.

Which key principle in valuation refers to

can be attributable to the following except placing emphasis on future cash flows as a
for. general concept for most valuation
Combined products / markets techniques except for some circumstances
where value can be better derived from
Employee morale
asset liquidation?.
Cost reductions
The value of a business is defined only at a
Cross-disciplinary talents of the combined specific point in time
organization
Firm value can be impacted by underlying net
tangible assets
7.True or False: A firm’s industry choice,
competitive positioning and corporate Market dictates the appropriate rate of return for
investors
strategy all influence the difference
between the firm’s actual and required Value varies based on the ability of business to
generate future cash flows
return on capital..
True 11.Price, expressed in terms of cash
False equivalents, at which property would
change hands between a hypothetical
8.Which of the following is correct?. willing and able buyer and a hypothetical
The financial analysis precedes the strategy willing and able seller, acting at arm’s
analysis length in an open and unrestricted market,
The prospective analysis follows the financial when neither is under compulsion to buy or
analysis sell and when both have reasonable
The industry analysis follows the financial analysis knowledge of the relevant facts..
The prospective analysis precedes the strategy Intrinsic Value
analysis
Fair Market Value

9.Which of the following is a potential Liquidation Value

finding when analyzing revenues and Zonal Value
gains?.
12.Which of the following is not included in
Recognizing minimal amount for reserves
the understanding the business phase?.
Increase in bank overdraft
Describing business strategy
Recognition of sales prior to installation and
acceptance of customer Understanding industry peculiarities

Factoring of receivables Analyzing prospective information

Reading historical financial statements
13.This refers to value of any asset based Chartists
on the assumption assuming there is a
Activist investors
hypothetically complete understanding of
Information traders
its investment characteristics that will
become the market value when other Fundamental analysts

investors reach the same conclusion.

18.Which of the following is incorrect about
Fair market value
the concept of value?.
Going concern value
Value refers to resources owned or controlled by
Liquidation value a business or an economic entity.
Intrinsic value Value is how much a particular object is worth to
a particular set of eyes
14.If the business projects revenues starting A company creates value if and only if the return
from GDP and consumption % forecast, on capital invested exceed the cost of acquiring
they are practicing what?. capital

Haphazard forecasting Value is created from the difference between cash

inflows generated by an investment and the cost
Bottoms-up forecasting associated with the capital invested
Top-down forecasting
19.True or False: Ethically, analysts can use
Side-by-side forecasting
all information that they can access,
15.Mainly involves managing the firm’s whether public or privately available, in
capital structure, including funding sources order to do the valuation exercise.
and strategies that the business should True
pursue to maximize firm value. False
Merger
20.Which of the following industry factors
Corporate finance
does not affect the bargaining power of
Portfolio Management
buyers in the industry?.
Due Diligence
Concentration of buyers relative to the
concentration of sellers
16.True or False: Business model refers to
Price sensitivity of customers
the inherent technical and economic
characteristics of an industry and the trends All choices affect bargaining power of buyers.
that may affect this structure. Ratio of fixed to variable costs
True
False

21.What is the right sequence of the

17.These type of investors tend to look for following steps in the valuation process?. .
companies with good growth prospects 1
that have poor management. Understanding the business
2
Statement of comprehensive income
Forecasting financial performance
Statement of changes in owner's equity
3
Select right valuation model
26.True or False: Sales and profit numbers
4 should consistently move in the future
Prepare valuation model based on forecasts
based on current trends if there is no
5 significant information that will prove
Apply valuation conclusion and provide otherwise..
recommendation
True
22.Which generic corporate strategy is
False
described to incur the lowest cost among
market players with quality that is 27.True or False: Qualitative factors are
comparable to competitors which allow the considered in the forecasting process in
firm to set sales prices around the industry order to make valuation approximate the
average?. true reality of the firm.
Cost leadership True
Differentiation False
Cost focus
28.True or False: If there are many potential
Differentiation focus
buyers with many acquisition targets, value
23.__________ refers to the possible range of of the target firms may rise since the buyers
values where the real firm value lies. will express more interest to buy the
business.
Volatility
True
Risk of the unknown
False
Informed guess
Uncertainty 29.Sale of a major component or segment
of a business (e.g. brand or product line) to
24.True or False: Active investors are more another company.
interested in understanding valuation than Divestiture
passive investors.. Mergers
True Acquisitions
False Spin-off

30.Which of the following is most relevant

25.If you want to compute for the historical for valuation?.
trend of the company's revenues, which
Cash flows
document should you look at?.
Accounting profits
Statement of financial position
Net revenues
Statement of cash flows
 Net income

31.True or False: Analysts should be careful

when analyzing target firms since they
typically show very optimistic projections in
order to increase their value..
True
False

32.True or False: Firms with higher

underlying net tangible asset value typically
exhibits less stability which impairs its going
concern value..
True
False

33.Which of the following is correct?.

New entrants make rivalry less intense.
When there is strong supplier power, this tends to
make industry profits lower.
Industry rivalry refers to the relationships
between interrelated products and services in the
industry.
Strong buyer power means that market players
are not dependent to few customers to survive.

34.__________ assumes that the combined

value of two firms will be greater than the
sum of separate firms.
Network effect
Control
Economies of scale
Synergy

35.True or False: Uncertainty is captured in

6.Watson Corporation computed the
valuation models through the cost of
following items from its financial records
capital or discount rate..
for the year: Price-earnings ratio 12 Payout
True
ratio .6 Asset turnover ratio .9 The dividend
False yield on Watson’s common stock is.
5%
 10.8% Php56,250
7.5% Php46,625
7.2%
10.This component of the financial model
7.Lucille Inc. declared its dividends at serves as the dash board to enable the
Php1.25/share. The company’s stocks were modelers to analyze the results and to
last traded at Php45 per share. The facilitate the readers’ appreciation on the
dividend yield of the company is ______.. results of the project.
36 Pro-forma Financial Statements

0.028 Assumption Sheet

0.28 Title Page

28 Data Key Results

8.The following information is provided 11.True or False: If Book-to-Market

about the common stock of Evergreen, Inc. approach is used for comparable company
at the end of the fiscal year: Number of analysis, the key component of the financial
shares outstanding 1,800,000 Par value per statement needed is the Statement of
share P 10.00 Dividends paid per share (last Comprehensive Income..
12 months) P12.00 Market price per share False
P108.00 Earnings per share 24.00 The price- True
earnings ratio for Evergreen’s common
stock is. 12.Cornerstone Inc. reported revenue for
3.0 times the period amounting to Php75,200 and
EBITDA Margin of 60%. How much is the
9.0 times
operating expenses excluding
4.5 times
depreciation?.
10.8 times
Php75,200
Php45,120
Php30,080
0

13.Raphael Marco Corp., a company with

outstanding common shares of 1,000,000
9.Singapore Ltd. has reported Php125,000 and 10% preferred shares amounting to
revenue where their EBITDA Margin is 45%. Php1,000,000. Reported net income of
If the taxes are 30% of the EBITDA, how Raphael Marco is at Php7,250,000. The
much is the Net Cash Flows if the capital firms similar to Raphael Marco is having a
expenditure was purchased at Php1,500?. P/E Multiple of 4. How much is the earnings
Php37,875 per share of Raphael Marco Corp.?.
Php39,375 Php7.35
 Php7.25 55.0%
Php7.15
17.The ____________ represents the price of
Php7.05
the basket of commodities for a particular
14.True or False: Dividends can serve as a period.
proxy of cash flows from operating (1/1 Point)
activities before tax.. Single choice. Inflationary premium
(1/1 Point) Stock index
True Per capita consumption
False Consumer price index

15.This ratio sends the signal on how much 18.This metric is used to assess ability of
the market perceives the value of the the company to support its capital through
company as compared to what it actually its earnings.
earned. Economic value added
Book-to-market ratio Net cash flow to equity
Dividend yield ratio Net present value
Price/earnings ratio Net cash flow to the firm
EBITDA Multiple
19.The following data were gathered from
the annual report of Thorn Products:
Market price per share Php 30.00 Number
of ordinary shares 10,000 Net income Php
100,000 Ordinary equity Php120,000 What
is the book to market ratio?.
3.00
0.33
0.40
2.50

16.Magsaysay Company reported the 20.Typically, treasury bills issued by the

following revenues in the last 5 years. Year government are the reference point when
1 Year 2 Year 3 Year 4 Year 5 2,000,000 determining.
2,500,000 2,320,000 2,700,000 3,100,000 Market return
What is the compounded annual growth Risk-free interest rate
rate of the revenues reported by Magsaysay Required return
Company?.
Risk premium
9.2%
14.8% 21.Lumus Corp. incurred business meetings
11.6%
expenses for the year amounting to
Php65,200.00. The company assumes 5%
inflation to all its expenses for the following
25.Gising Company is preparing the
year. The business meeting expenses for
following financial information for
the following year is ____..
presentation to prospective investors. Y
Php65,200
Year 1 Year 2 Year 3 Revenues 1,000,000
Php68,460 1,500,000 2,000,000 Cost of Goods Sold
Php70,000 500,000 700,000 1,100,000 Operating
Php72,400 Expenses 300,000 500,000 700,000
Corporate income tax rate is 30%. Gising
22.Amounts of cash available for Company is looking at a 5% constant
distribution to both debt and equity claims growth on net cash flows after the three-
from the business or asset. year historical forecast they prepared.
Net cash flow to creditors Weighted average cost of capital of Gising
Net cash flow to the firm Company is 8%. The operating expenses
include annual depreciation of Php250,000.
Operating cash flows
Gising Company has long-term debt
Net cash flow to equity
amounting to Php1,000,000. Gising
Company projected that it will need
23.True or False: The components of the
additional PhP170,000 for capital
Audited Financial Statements enable the
investments. How much is the projected net
analyst or the financial modeler to assess
operating profit after tax margin for Year
the future of the company based on its past
2?.
performance..
20%
False
14%
True
30.7%
19.3%

26.The following data were gathered from

24.These are investments which are already the annual report of Thorn Products:
in the going concern state, as most Market price per share Php 30.00 Number
business are in the optimistic perspective of ordinary shares 10,000 Net income Php
that they will grow in the future because of 100,000 Ordinary equity Php120,000 The
historical proof. Single choice. book value per share is. Single choice.
(1/1 Point) (1/1 Point)

Green Field Investments Php14.00

Brown Field Investments Php30.00

Black Field Investments Php12.00

Blue Field Investments Php15.00

27.Gising Company is preparing the year, they are very certain that the volume
following financial information for to be sold is 750 units at Php125.00 per
presentation to prospective investors. Y unit. Their operating profit margin is 40%,
Year 1 Year 2 Year 3 Revenues 1,000,000 which includes depreciation of Php1,250.
1,500,000 2,000,000 Cost of Goods Sold For purposes of valuation, they would like
500,000 700,000 1,100,000 Operating to get quickly determine their EBITDA.
Expenses 300,000 500,000 700,000 Certified Inc is expecting a growth rate of
Corporate income tax rate is 30%. Gising 12%. They will not increase their prices to
Company is looking at a 5% constant maintain their captured market. Based on
growth on net cash flows after the three- the information provided, the projected
year historical forecast they prepared. EBITDA for the succeeding year is.
Weighted average cost of capital of Gising Php45,250
Company is 8%. The operating expenses
Php43,250
include annual depreciation of Php250,000.
Php41,250
Gising Company has long-term debt
amounting to Php1,000,000. Gising Php38,750

Company projected that it will need

additional PhP170,000 for capital
investments. How much is the net cash flow
of Gising Company in Y1?.
Php390,000
Php290,000
Php220,000
Php140,000

30.Certified Inc. is developing its financial

28.In determining the value using plan for the following year. In the current
comparable company analysis, the year, they are very certain that the volume
following factors must be considered to be sold is 750 units at Php125.00 per
except. unit. Their operating profit margin is 40%,
Comparators should be included in the Top 1000 where depreciation is Php1,250. For
companies in the Philippines purposes of valuation, they would like to
Comparators must be at least with the similar get quickly determine their EBITDA.
operations or in the similar industry Certified Inc is expecting a growth rate of
Period of observation must be comparable 12%. They will not increase their prices to
Variables used in determining the ratios must be maintain their captured market. The units
the same they are projecting to be sold the following
year is _______.
29.Certified Inc. is developing its financial 750
plan for the following year. In the current
800
 840 reasonable market value per share of
Raphael Marco Corp.?.
880
Php29.40
31.What do you call the amount added to Php29.00
the value of a company in order to gain
Php28.60
control over it?.
Php28.20
Precedent transactions
Liquidity premium 35.If you are an external party to the
Earning accretion company you are valuing, which reference
should you look at if you want to know
Equity control premium
about the future plans and strategic
32.The following describes the benefits of direction of the company that are
having a sound Enterprise-wide Risk announced publicly?.
Management system except. Corporate disclosures
Improve distribution of resource across the firm Contracts
Facilitates elimination of all business risks Audited financial statements
Enhance business resilience against changes Peer information
Manage performance variability

33.This refers to the value recorded in the

accounting books of a firm as reflected in
the audited financial statements.. 7.The following statements are true in the
computation of Equity Value except.
Earnings per share
Outstanding debt maybe deducted from
Book value
Enterprise Value to arrive at Equity Value
Fair market value
Outstanding debt is deducted from Enterprise
Exit value Value hence cost of debt should not be included in
the required return
34.Raphael Marco Corp., a company with Terminal Value is included in the assumption to
outstanding common shares of 1,000,000 improve the Equity Valuation
and 10% preferred shares amounting to Depreciation improves the Equity Value because
Php1,000,000. Reported net income of of the tax benefit it generates
Raphael Marco is at Php7,250,000. The
firms similar to Raphael Marco is having a 8.An analyst covering Guilderland Mining
P/E Multiple of 4. How much is the Co. common stock estimates the following
information for next year. Expected return
on the market portfolio 12% Expected
return on Treasury securities 5% Expected P8,416
beta of Guilderland 2.2 Using the CAPM,
the analyst’s estimate of next year’s risk 12.Tanner Corporation had net income of
premium for Guilderland’s stock is closest $250,000 and paid dividends to common
to. stockholders of $50,000 in 2007. The
7.0% weighted average number of shares
outstanding in 2007 was 50,000 shares.
10.4%
Tanner Corporation's common stock is
21.4%
selling for $50 per share on the New York
15.4% Stock Exchange.
10 times
9.In determining the value of the company,
it is more fitting to us this if the available 5 times
information is the dividend per share and 2 times
the market value per share. 8 times
Book to Market
Dividend Yield Ratio
Price Earning Ratio
EBITDA Multiple

13.Jayvin Arts Corp reported a total assets

10.The market value of the firm is the result of Php250,000,000.00 with a return on total
of__________.. assets of 10%. The company ensures that
80% of their net income are cash. If Jayvin
Working capital decisions.
Arts Corp projects 10% growth year on year
Dividend decisions. and has a required rate of return of 8%, the
Capital budgeting decisions. net present value of the net cash flows for
Trade-off between risk and return. the next 3 years with a terminal value of
Php266,200,000 is Php _______.
11.Doo Doo Dah Dah has revenues of
273,567,927
P50,000, general & administrative expenses
275,873,342
of P35,000 and depreciation expense of
P4,200.The firm is in the 38% tax bracket. 328,449,784

What would be the firm's cash flow from 345,540,800

operations?
14.Olive Pup is an analyst is an investment
P4,216
firm. Whenever she is ask for prospective
P10,896 investment her decision would rely on the
P6,800 information that can be validated and with
supporting documentation. While she is The price-earnings ratio is 10 and a share of
50% risk averse, she maintain her optimism common stock was selling for 125 times the amount
based on the reports, historical growth of earnings per share at the end of 2019
patterns and coupled with market The market price per share and the earnings per
information. Olive Pup is a _______.. share are not statistically related to each other.

Fundamental Analyst
18.Stock prices are growing if.
Activist Investor
EBITDA Multiple is decreasing
Charterist
Book to Market Ratio is decreasing
Information trader
Price Earnings Ratio is decreasing

15.In calculating the costs of the individual Dividend Yield is increasing

components of a firm's financing, the
19.In an industry, the risk free rate is 6%
corporate tax rate is important to which of
and the beta is 2.0. If the market return is
the following component cost formulas?.
10%, the cost of equity for this industry is
preferred stock.
_____.
debt.
14%
common stock.
10%
none of the above.
8%
6%

16.If you are forecasting revenues, which of 20.Which of the following is an incorrect
the following items will not be relevant?. combination?
Beginning inventory Analyzing financial information: audited financial
statements
Revenue mix
Understanding business model: prospectus
GDP Forecast
Competitive position: contracts
Historical sales growth
Understanding industry profitability: Porters' Five
17.The following information is available for Forces
Watson Company.: Market price per share
21.Selected data from Mildred Company’s
of common stock 25.00 Earnings per share
year-end financial statements are presented
on common stock 1.25 Which of the
below. The difference between average and
following statements is correct?.
ending inventory is immaterial. Current
The price-earnings ratio is 20 and a share of
ratio 2.0 Quick ratio 1.5 Current liabilities
common stock was selling for 20 times the amount of
earnings per share at the end of 2019 P120,000 Inventory turnover (based on cost
of sales) 8 times Gross profit margin 40%
The price-earnings ratio is 5.0% and a share of
common stock was selling for 5.0% more than the Mildred’s net sales for the year were.
amount of earnings per share at the end of 20019 P800,000
P672,000
 P480,000 dividends per share divided by current price per
share.
P720,000
the dividend yield plus the capital gains yield.
22.As a stockholder who are interested in dividends per share divided by earnings per
earning dividends, you are most interested share.
in knowing which of the following?.
25.A company offers unique products that
Revenue mix
are widely valued by customers, it is likely
Net cash flows to equity
to follow a:.
Net cash flows to the firm
Cost leadership strategy
Variable and fixed cost structure
Focus strategy
Combination strategy
Differentiation strategy

26.Mico Corp. is planning to invest for

23.High Hopes Inc is targeting to hit the net
Php5,000 Million and expecting an average
cash flows from operating activities for the
earnings of Php750 Million. The economic
following years: Year 1 - Php55,000,000
value added for this investment with a
Year 2 - Php57,750,000 Year 3 -
required return of 12% is Php ______.
Php60,637,500 In order to realize the
growth, the company may invest further (150 Million)

Php125,000,000 to be funded by 50% debt 150 Million

by end of Year 1. Based on the foregoing, if (250 Million)
the required return is 14%, High Hopes 250 Million
Inc's enterprise value, excluding terminal
value is about Php _______. 27.Jayvin Arts Corp reported a total assets
24,000,000 of Php250,000,000.00 with a return on total
(24,000,000) assets of 10%. The company ensures that
80% of their net income are cash. If Jayvin
(39,000,000)
Arts Corp projects 12% growth year on year
39,000,000
and has a required rate of return of 8%, the
net present value of the net cash flows for
24.The dividend-payout ratio is equal to.
the next 3 years is Php _______.
dividends per share divided by par value per
share. 80,694,000
64,555,200
 25,195,520 additional value afforded to stocks which give
controlling power to the investor
21,518,400
given for stocks that cannot be easily sold as
28.Elijah Foods Inc. (EFI) has a market there is no ready market for it
capitalization of Php4,760,680,000 and
31.An offer for Unknown Corp's stock is
EBITDA multiple of 4.0. Historically, the
Php20 per share. The dividend policy is to
company has a after tax profit margin of
distribute a regular dividends of Php3.00
20%, before tax profit margin of 30%,
per share. If the required return for this
EBITDA margin of 50%. EFI's Net Income
investment is 16%, the offer for the stock
before tax is about Php ____________.
should be at most Php ____/share.
476,068,000.00
20.00
714,102,000.00
19.50
793,446,666.67
19.25
500,000,000.00
18.75

29.High Hopes Inc is targeting to hit the net 32.An analyst is looking investing in a
cash flows from operating activities for the company although he is considering 3
following years: Year 1 - Php55,000,000 growth scenarios as follows: Scenario A -
Year 2 - Php57,750,000 Year 3 - 10%; Scenario B - 12%; and Scenario C -
Php60,637,500 In order to realize the 15%. Further assessing these scenarios it is
growth, the company may invest further found that the probability of occurrence
Php125,000,000 to be funded by 50% debt would be 40%, 40%, and 20%, respectively.
by end of Year 1. Based on the foregoing, if Based on the foregoing, the weighted
the required return is 14%, High Hopes average growth rate is ______..
Inc's equity value, excluding terminal value 15.00%
is about Php _______. 12.33%
(24,000,000) 11.80%
24,000,000 10.00%
39,000,000
33.Do Raymond is a high caliber analyst
(39,000,000)
and broker. He spends every morning
30.Lack of marketability discount is. reading the newspapers before the trading
floor opens. During lunchtime he meets
given to junk bonds
with some of his colleagues. He maintains a
considered when price of shares are less liquid
group page in social media that discusses
compared to actively traded stocks
the trends. As a portfolio manager, he is sheet amounts represent both average and
considered as a ___________.. ending balance figures. Assume that all
Fundamental Analyst sales were on credit. Income Statement
Sales P 90,000 Cost of goods sold 45,000
Activist Investor
Gross margin 45,000 Operating expenses
Charterist
20,000 Net income P 25,000 Number of
Information Trader shares of common stock 6,000 Market price
of common stock P20 Dividends per share
34.This refers to the value of any asset
1.00 Cash provided by operations P40,000
based on the assumption that there is a
What is the earnings per share on common
hypothetically complete understanding of
stock?.
its investment characteristics..
P4.17
Fair market value
P6.66
Going concern value
P1.00
Liquidation value
P5.00
Intrinsic value

37.The following can be reasonable basis

35.Samson’s Sailboats Inc. recently reported
for determination of terminal value except.
the following income statement 2019 Sales
Net cash flows and discount rate
P3,500 Operating costs 2,500 EBIT P1,000
Interest 200 EBT P 800 Taxes (40%) 320 Net Net cash flows and growth rate
income P 480 Dividends (40%) P 192 Net cash flows and discount less growth rate
Addition to retained earnings P 288 This Net cash flows and discount plus growth rate
year the company is forecasting a 40
percent increase in sales, and it expects that 38.The net cash flow is P15,000 and the net
its year-end operating costs will decline to investment in operating capital is P9,000.
60 percent of sales. Samson’s tax rate, What is the net operating profit after
interest expense, and dividend payout ratio taxes?.
are all expected to remain constant. What is -6,000
Samson’s projected 2020 net income?.
-24,000
P931
24,000
P1,056
6,000
P775
P254 39.Elijah Foods Inc. (EFI) has a market
capitalization of Php4,760,680,000. In a
36.The following information pertains to operating period, EFI reported a revenue of
Tanzi Company. Assume that all balance Php5,600,800,000. Historically, the company
has a after tax profit margin of 20%, before processing line. The strategy taken by
tax profit margin of 30%, EBITDA margin of Olympus is known as ______..
50%. EFI's P/E ratio is ____. Merger
1.70 Leveraged Buyout
2.83 Spin Off
4.25 Divestiture
5.00
43.Recto Co. has a price earnings ratio of
40.To increase the given present value, the 10, earnings per share of P2.20, and a pay
discounted rate should be adjusted. out ratio of 75%. The dividend yield is.
Downward. Single choice.
(1/1 Point)
Upward.
25.0%
Constant.
22.0%
No change.
10.0%
7.5%
44.Mico Corp. is planning to invest for
41.High Hopes Inc is targeting to hit the net Php5,000 Million and expecting an average
cash flows from operating activities for the earnings of Php375 Million. The economic
following years: Year 1 - Php55,000,000 value added for this investment with a
Year 2 - Php57,750,000 Year 3 - required return of 10% is Php ______.
Php60,637,500 In order to realize the (125 Million)
growth, the company may invest further 125 Million
Php125,000,000 to be funded by 50% debt (875 Million)
at the beginning of Year 1. Based on the
875 Million
foregoing, if the required return is 14%,
High Hopes Inc's equity value, with a 45.Which of the following is correct?.
terminal value of Php673,750,000, is about
In order to account for seasonality, financial
Php _______. projections should be done annually.
480,000,000 Forecasting starts with the preparation of the
401,000,000 projected income statement.

24,000,000 When making projections, increase in volume

should always lead to increase in gross profit.
39,000,000
Bottom-up forecasting uses per capita
42.Olympus Inc. in its annual review of the consumption forecasts as starting point.

corporate performance find that it would

be best to acquire new business in their 46.Evangelion Inc. has outstanding shares
portfolio unfortunately their funds went of 1,500,000 and average market value per
short. Atlas Corp agreed to purchase food share of Php 22.50. The company is
historically earning 30% profit margin. The company forecasts that its sales will
Evangelion Inc's average revenue, if the P/E increase by 10 percent in 2020 and its
ratio is 4.0, should be Php ________.. operating costs will increase in proportion
45,000,000 to sales. The company’s interest expense is
expected to remain at $200 million, and the
33,750,000
tax rate will remain at 40 percent. The
28,125,000
company plans to pay out 50 percent of its
8,437,500 net income as dividends, the other 50
percent will be additions to retained
earnings. What is the forecasted addition to
retained earnings for 2020?.
P1,260
P1,440
P1,790
P1,810
49.Indo Industries has P2.5 million in sales
47.The following information pertains to and P0.8 million in fixed assets. Currently,
Tanzi Company. Assume that all balance the company’s fixed assets are operating at
sheet amounts represent both average and 75 percent of capacity. What level of sales
ending balance figures. Assume that all could Indo Industries have obtained if it
sales were on credit. Income Statement had been operating at full capacity?.
Sales P 90,000 Cost of goods sold 45,000 P2,800,000
Gross margin 45,000 Operating expenses
P3,333,333
20,000 Net income P 25,000 Number of
P3,000,000
shares of common stock 6,000 Market price
of common stock P20 Dividends per share P3,125,575
1.00 Cash provided by operations P40,000
What is the price earnings ratio for this 50.This process involves mainly managing
company?. the firms financial resources and capital
structure including financing sources and
6 times
developing strategies that will have a
4.8 times positive impact on the firm's value is called.
8 times Financial Management
9.6 times Corporate Finance
Accounting
48.Kenney Corporation recently reported
the following income statement for 2019: Valuation
Sales P7,000 Operating costs 3,000 EBIT
P4,000 Interest 200 Earnings before taxes 51.Liquidation value is relevant to.
(EBT). P3,800 Taxes (40%) 1,520 Net income Financially-distressed companies
available to common shareholders P2,280
 Financial analysts who recommend stock picks to Activist Investor
clients
Charterist
Stockholders who are holding stocks with
Information Trader
severely declining market price
Companies that reported negative profit margin 55.Champ Inc. reported net income after
for the year
tax of Php500,000 and is constantly
growing at 10% per year. If Champ Inc's
52.A repeatable pattern of increases or
depreciation is Php75,000 per year, the net
decreases in demand, depending on
cash flows on the following year is
periods of time of one year or less, is a time
Php______..
series pattern called:.
550,000
Random
575,000
Seasonal
632,500
Trend
650,000
Cyclical

56.Companies are compared using P/E

53.Quartz plc pays an annual dividend of 30
ratio. The higher the P/E the higher the
cents per share to shareholders, which is
growth. Given the foregoing which of the
expected to continue in perpetuity. The
following statements is NOT correct..
average rate of return for the market is 9%
and the company has a beta coefficient of The higher that market capitalization the higher
the P/E ratio
1.5. The risk-free rate of return is 4%. What
is the expected rate of return for the P/E ratio can be used to determine the value of
the equity
shareholders of the company?.
P/E ratio is calculated excluding the impact of
17.5%
taxes
23.5%
If net income is higher than the market
11.5% capitalization the P/E ratio results to a lower value
16.5%
57.Stock prices are declining in all cases
54.Maricel works in a large investment bank except.
in Makati. On a daily basis she makes Book to Market is increasing
recommendation to her clients on how to P/E Ratio is decreasing
improve their portfolio and attract more
Dividend Yield is decreasing
investment. She uses regression to predict
EBITDA Multiple is decreasing
the stock prices based on certain key
performance indicators that she set. Given 58.Based on AICPA guidance, aggressive
the methodologies adopted by her, she is accounting is indicated based on the
considered as what type of portfolio following red flags except.
manager?.
When significant services conducted by an
Fundamental Analyst independent audit
 Disclosures made are of best quality
The organization is so much focused in 61.Jonald Corp. decided to merge with Noel
generating and doubling up their revenues
International and formed One Big World
Continuous change in the auditors after a series Company. The decision of Jonald Corp
of disclosures and information about the dispute
expects that there is a exponential effect in
entered
valuation if they merge with another entity.
The analysis made by Jonald Corp to come
with a decision is driven by what factor in
valuation?.
Liquidation
Excess of Cash Flows
Control
Synergy

59.The following information is available for 62.Which of the following is not a function
Duncan Co.: Dividends per share of of corporate finance?.
common stock P 1.40 Market price per
Capital budgeting
share of common stock 17.50 Which of the
Obtaining additional funds through initial public
following statements is correct?.
offering
The dividend yield is 8.0%, which is of interest to
Issuance of fairness opinion on valuations
investors seeking an increase in market price of their
stocks. Strategy communication to stakeholders
The dividend yield is 8.0%, which is of special
interest to investors seeking current returns on their 63.What is the market price of a share of
investments. stock for a firm with 100,000 shares
The dividend yield is 12.5%, which is of interest to outstanding, a book value of equity of
bondholders. P3,000,000, and a market/book ratio of 3.5?.
The dividend yield is 8.0 times the market price, P8.57
which is important in solvency analysis.
P30.00

60.Ana Lee Inc purchased an old warehouse P85.70

that is used to be leased by Domino Corp. P105.00
Ana Lee Inc. converted the warehouse into
a food park and opened it various food 64.Enterprise-wide Risk management allows
concessionaires. The investment made by the company to realize various benefits
Ana Lee is considered as a ___________. except.
Brown Field Investment Creates challenges in identification and mitigating
the chances that the risk factors maybe triggered
Going Concern Business Opportunity
Provides an avenue to open new investment or
Green Field Investment expansion opportunities
White Field
 Contributes to options that will allow new
strategies to operate efficiently
Prepare to unanticipated changes that the
company may face

65.Bargaining power of customers is high if.

The buyer has little information about the market
Switching costs are low for substitute products
The buyer requires a high quality product for own
production
Differentiation of competitors product is low

66.High Hopes Inc is targeting to hit the net

cash flows from operating activities for the
following years: Year 1 - Php55,000,000
Year 2 - Php57,750,000 Year 3 -
Php60,637,500 In order to realize the
growth, the company may invest further
Php125,000,000 to be funded by 50% debt
by end of Year 1. Based on the foregoing, if
the required return is 14%, High Hopes
Inc's enterprise value, with a terminal value
of Php673,750,000, is about Php _______.
480,000,000
401,000,000
24,000,000
39,000,000