Free FINRA Series 79 (Investment Banking Representative) Collection, Analysis and Evaluation of Data Practice Questions
Collection, analysis and evaluation of data is the largest section on the FINRA Series 79 exam (49%). Questions cover financial statement analysis, liquidity and leverage ratios, enterprise value and trading multiples, comparable company and precedent transaction analysis, discounted cash flow, LBO modeling, and buy-side and sell-side due diligence (FINRA).
Which of the following best describes a private investment in public equity (PIPE) transaction?
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Correct Answer: B
Solution
B is correct. A PIPE is a privately negotiated placement in which a company that is already public sells equity (or equity-linked) securities, often at a negotiated discount, to a limited group of accredited or institutional investors rather than through a broadly marketed public offering.
Question 2
Medium
During a sustained period of rising input prices, how does the use of LIFO inventory accounting compare to FIFO for the same company?
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Correct Answer: B
Solution
B is correct. Under rising prices, LIFO charges the most recent and higher costs to COGS, which raises COGS and lowers net income, while the older and cheaper costs remain in ending inventory, leaving ending inventory lower than under FIFO.
Question 3
Hard
A DCF yields an enterprise value of $1,000M. The company has total debt of $350M, cash of $50M, preferred stock of $50M, no minority interest, and 100M shares outstanding. What is the implied equity value per share?
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Correct Answer: D
Solution
D is correct. Bridge EV to equity value: subtract debt and preferred, add back cash. 1000−350−50+50=650. Divide by 100M shares: 650/100=6.50, so $6.50 per share.
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