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Series 86 Greenlight Exam 1 questions and answers certified 2024
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Series 86 Greenlight Exam 1 questions and answers certified 2024
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Series 86 Greenlight Exam 1A company has a price-to-earnings ratio of 18 and a dividend yield of 2.50%.
What is the company's dividend payout ratio?
a) 14%
b) 45%
c) 56%
d) 72% - correct answer ✔b) 45%
Use the following information to answer this question.
The Girtz Corporation is considering the acquisition of the Yellow Company
with common stock. Relevant financial information is as follows:
Girtz:
Present earnings- $4000
Common shares outstanding- 2000
EPS- $2.00
P/E ratio- 12
Yellow:
Present earnings- $1000
Common shares outstanding- 800
EPS- $1.25
P/E ratio- 8
The Girtz Corporation is considering the acquisition of the Yellow Company
using common stock. Girtz plans to offer a premium of 20% over the market
value of Yellow stock. If the price/earnings ratio for the Girtz Corporation stays
at 12, what is the approximate market price per share of the surviving
company?
a) $10.00
,b) $12.00
c) $24.00
d) $25.00 - correct answer ✔d) $25.00
Given the information relating to a discounted cash flow analysis, what is the
implied equity value per share?
The present value of the cash flows is $485 MM
The present value of the terminal value is $3,200 MM
The number of outstanding shares is 115 MM • The debt is $510 MM
The cash on the balance sheet is $225 MM
a) $32.04
b) $29.56
c) $34.52
d) $38.43 - correct answer ✔b) $29.56
The S&P 500 has an average P/E of 25. Grind and Muck Industries is trading
at 8 times its trailing EPS. Which of the following observations is implied about
Grind and Muck?
a) the company's earnings are expected to increase
b) an external influence, such as a major lawsuit, is depressing the price of
the company
c) as an industrial company, a low P/E is expected
d) the company is highly leveraged - correct answer ✔b) an external
influence, such as a major lawsuit, is depressing the price of the company
Which of the following provides the BEST explanation for an increase in EPS
estimates for the next year?
,a) switching from a LIFO inventory recognition method to FIFO during an
inflationary period.
b) writing down inventory due to the market value of the inventory falling
below the book value in the current assets section of the balance sheet.
c) producing patents for 75% of a business' products for 10 years, despite the
fact that the industry average patent production is 40%.
d) depreciation expense that's greater than CAPEX indefinitely, thereby
leading to increased cash flow for share repurchases. - correct answer ✔a)
switching from a LIFO inventory recognition method to FIFO during an
inflationary period.
Which of the companies in the above exhibit has the highest PEG ratio?
Company: 1, 2, 3, 4
Price: 20, 30, 40, 50
Earnings yield: 5.00%, 4.17%, 6.67%, 4.55%
Growth rate: 16%, 14%, 10%, 12%
a) company 1
b) company 2
c) company 3
d) company 4 - correct answer ✔d) company 4
Which of the following changes is LEAST likely to affect the valuation of a
company using a discounted cash flow (DCF) model?
a) the terminal growth rate increases
b) interest rates decline
c) the company's common stock declines in value
d) the company repurchases a portion of its outstanding common stock -
correct answer ✔c) the company's common stock declines in value
, Which company MOST LIKELY has the highest depreciation expense as a
percentage of annual sales?
a) cyber security company
b) shipping
c) discount retailer
d) corporate consulting - correct answer ✔b) shipping
Calculate beta given the following:
Debt to total capital is 40%
Cost of debt 6%
Weighted cost of capital is 10%
Expected market return 9%, Risk free rate is 3%
a) 1.9
b) 1.2
c) 1.61
d) 14.1 - correct answer ✔c) 1.61
Determine a company's share price based on the following information:
ROE 15%
Intermediate-term economic growth 4%
Retention rate 40%
Current dividend $1.00 per share
Cost of equity (k) 11.00%
a) $14.86
b) $21.20
c) $20.00
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