BV 200 Mastery Quiz — Integrative DCF, WACC, and Valuation Framework

This quiz tests mastery across all BV 200 topics: DCF construction and framework choice, FCFF/FCFE computation, ROIC analysis, financial statement reorganization, balance sheet and income statement forecasting, terminal value mechanics, WACC estimation, sensitivity analysis, multiples reconciliation, and applied case study insights from the 3M valuation. Each question requires synthesizing multiple concepts and applying judgment — not just recalling formulas.

What you'll learn

Demonstrate mastery of DCF frameworks, FCFF derivation, and ROIC-growth interaction
Apply WACC estimation methodology including beta adjustment, ERP, and market value weights
Execute a terminal value calculation using both the Gordon Growth Model and KVD formula
Reconcile DCF and multiples-based valuation and interpret divergences
Apply sensitivity analysis and scenario analysis correctly to derive a valuation range

Integrative Assessment — BV 200 Core Concepts

This quiz covers all 14 lessons in the BV 200 track. Questions are designed to integrate multiple concepts and require multi-step calculations or synthesis across frameworks. Review any lesson where you find gaps before proceeding to BV 300.

Work through each question before looking at the answer. For calculation questions, attempt the full calculation sequence — the most common errors are in unit consistency, forgetting to after-tax cost of debt, using book value weights instead of market value, or applying end-year discounting to explicit period FCFFs. For conceptual questions, focus on the 'why' not just the 'what' — these questions test whether you understand the principles, not just the mechanics.

Key Takeaways

DCF equivalence: Entity DCF, equity DCF, APV, and economic profit all yield the same intrinsic value when applied consistently — the choice of method is driven by what changes in the scenario (leverage, tax benefits, operating performance)
FCFF = NOPAT + D&A − Capex − ΔNWC; the most common errors are including interest in operating income, double-counting D&A, and ignoring non-cash charges beyond D&A
ROIC × reinvestment rate = growth rate; a company with ROIC > WACC creates value through growth; ROIC < WACC destroys value even with positive growth — this is the single most important value creation insight from McKinsey
WACC: always market value weights, always unlever/relever beta for capital structure changes, use implied or forward-looking ERP rather than historical mean — these three principles prevent the most common WACC errors
No single valuation method is definitive — the football field, implied multiples test, and reverse DCF together form a robust analytical framework for reconciling DCF with market pricing

Quiz — 10 Questions

Answer one at a time

Question 1 of 100 answered

Company A: EBIT = $400M, D&A = $80M, Capex = $100M, ΔNWC = $30M, Tax rate = 25%. Net debt = $500M, beginning of year. Interest expense = $30M (pre-tax). What is FCFF and FCFE?

AFCFF = $290M; FCFE = $247.5M

BFCFF = EBIT×(1−t) + D&A − Capex − ΔNWC = $400×0.75 + $80 − $100 − $30 = $300 + $80 − $100 − $30 = $250M. FCFE = FCFF − After-tax Interest + Net Debt Change = $250M − $30M×(1−0.25) + $0 = $250 − $22.5 = $227.5M. (Assuming no net debt issuance during the year.)

CFCFF = $250M; FCFE = $227.5M

DFCFF = $330M (forgetting to tax-affect EBIT); FCFE = $307.5M

The 3M Valuation — Damodaran's Applied FCFF Model from Filing to Intrinsic Value

Completed

Business Valuation Track

In this lesson

200 — Core Valuation Methods

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