The Secrets of Wall St. Course – Company Valuation and Securities Pricing

Question 1 of 16

1. Question

With little or no assets and in the pre-revenue stage, how does one value a start-up company?

a. One cannot valuate a start-up company any reasonable degree.
b. One can, but only using a balance sheet model.
c. One can, but only using a book value model.
d. One can, but only using the Net Present Value models derived from future values bases on GAAP Compliant pro forma financial projections.

Question 2 of 16

2. Question

Company valuation models that use discounted future cash flows.

a. The Book Value model.
b. The Annual Sales model.
c. Net Present Value model.
d. The Price / Earnings Ratio model.
e. All the Above
f. None of the Above
g. Only a & b
h. Only a & d

Question 3 of 16

3. Question

Net Present Value model is used primarily for commercial real estate valuations.

True
False

Question 4 of 16

4. Question

Net Book Value model is used primarily for Wall Street valuations.

True
False

Question 5 of 16

5. Question

If you establish a P/E Ratio of five (5) and the last 12 months produced earnings per share of ($6.00) the price the common stock would be $30.00 per share.

True
False

Question 6 of 16

6. Question

If you establish a P/E Ratio of five (5) and the last 12 months produced earnings per share of ($6.00) and the company had 100,000 shares outstanding, with $250,000 in unsecured debt, the company valuation would be…

a. $600,000 as unsecured debt is not deducted for this valuation model
b. $450,000
c. $350,000
d. 0
e. None of the Above

Question 7 of 16

7. Question

The combination of the NPV and PE Ratio Models to valuate the company by pricing its common equity, through reverse engineering, is an acceptable model when using GAAP compliant pro forma financial projections.

True
False

Question 8 of 16

8. Question

Company valuation models that are used in an ad hoc manner.

a. The Book Value model.
b. The Annual Sales model.
c. Net Present Value model.
d. The Price / Earnings Ratio model.
e. All the Above
f. None of the Above
g. Only a & b
h. Only a & d

Question 9 of 16

9. Question

When pricing the Convertible Notes or Bonds, one analyzes these components:

a. The price of its original or discounted issuance.
b. The cumulative coupon or annual interest rate over a specified period, say at the end of the five years.
c. The principal of the Note or Bond to be received by the investor at maturity.
d. The value of the equity upon conversion into common equity —at the end of the conversion period, to arrive at a total, cumulative, aggregate end-value for conversion under 2 scenarios, staying private or going public.
e. All the Above
f. None of the Above
g. Only a & b
h. Only a, b & d

Question 10 of 16

10. Question

When pricing the Preferred Stock or Units, one analyzes these components:

a. The price of its original or discounted issuance.
b. The cumulative stated dividend rate over a specified period, say at the end of the five years.
c. The return of principal by the investor if “Called.”
d. The value of the equity upon conversion into common equity —at the end of the conversion period, to arrive at a total, cumulative, aggregate end-value for conversion under 2 scenarios, staying private or going public.
e. All the Above
f. None of the Above
g. Only a & b
h. Only a, b & c

Question 11 of 16

11. Question

When pricing the Preferred Stock or Units, one analyzes these components:

a. The price of its original or discounted issuance.
b. The cumulative stated dividend rate over a specified period, say at the end of the five years.
c. The return of principal by the investor if “Called.”
d. The value of the equity upon conversion into common equity —at the end of the conversion period, to arrive at a total, cumulative, aggregate end-value for conversion under 2 scenarios, staying private or going public.
e. All the Above
f. None of the Above
g. Only a & b
h. Only a, b & c

Question 12 of 16

12. Question

When pricing Convertible Participating Preferred Stock or Units, one analyzes these components:

a. The price of its original or discounted issuance.
b. The cumulative stated dividend rate over a specified period, say at the end of the five years.
c. The cumulative participative dividend rate over a specified period, say at the end of the five years.
d. The return of principal by the investor if “Called.”
e. The value of the equity upon conversion into common equity—at the end of the conversion period, to arrive at a total, cumulative, aggregate end-value for conversion under 2 scenarios, staying private or going public.
f. All the Above
g. None of the Above
h. Only a & b
i. Only a, b & c

Question 13 of 16

13. Question

Only the current yield (or if discounted the yield to maturity) can be stated in a tombstone ad for advertising when soliciting Convertible Notes or Bonds, not the IRR.

True
False

Question 14 of 16

14. Question

Only the current yield (or if discounted the yield to maturity) can be stated in a tombstone ad for advertising when soliciting Convertible Preferred Equity, not the IRR.

True
False

Question 15 of 16

15. Question

“Original Issue Discount” is a term used for what type of securities?

a. Common stock secondary offerings.
b. Preferred stock initial private offerings sold at par value.
c. Preferred stock discounted based on larger investment amounts.
d. Convertible Notes or Bonds sold at a discount to face value.
e. Preferred stock sold at a discount to face value.
f. All the Above
g. None of the Above
h. Only a & b
i. Only a, c & e
j. Only d & e

Question 16 of 16

16. Question

Selling “Original Issue Discount” Notes for a start-up company is appropriate.

True
False

The Secrets of Wall St. Course – Company Valuation and Securities Pricing