The exam is divided in 4 sections (100 points in total):
Luxury (10 points in total)
Basics of Accounting (30 points in total)
Corporate Finance (30 points in total)
M&A (30 points in total)
You have 1 week to complete as much sections as you can,
GOOD LUCK!
Luxury section
1) Which challenges and risks are facing luxury Groups? (points 0/5)
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2) Which structure for a luxury group is the best? Mono-brand or multi-brand? Please provide the
reasons. (points 0/5)
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2
Basics of Accounting section
Part I: (points 0/10)
1) Question – If we say the balance sheet is a “photo”, what is the income statement? (points 0/2)
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2) Question – In which section of the cash-flow statement can you find the impact on cash of the
subscription of a new bank loan (in a retail company)? (points 0/2)
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3) Question – what is the accounting standard used for the consolidated financial statement for listed
companies in Europe? (points 0/2)
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4) Question – What is the amount of the net income in the consolidated financial statements of
LUXOTTICA at 31.12.2018? (points 0/2)
Nb: the objective of this question is not that you know this figure, but to make sure you remember where
you can find this information.
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5) What is a “functional currency” for a company? (points 0/2)
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Part II: (points 0/10)
1) Multiple Choice Answer – Which operations have no impact on the income statement: (points 0/5)
a) Amortization of a building
b) Issuance of an invoice to a customer
c) Payment of this invoice by the customer
d) Subscription of a bank loan
e) Payment of interest to the bank related to this bank loan
f) Payment of dividend
g) Purchase of a production line
h) Purchase of raw material which will be used and transformed next year
2) Question: What will be the consolidation method and the impact of these two companies on the
consolidated financial statements? (points 0/5)
Company A / Revenues: 90 M€ / Percentage of control: 30%
i) Consolidation method: _________ ii) impact on group’s revenue: _________
Company B / Revenues: 20 M€ / Percentage of control: 70%
i) Consolidation method: _________ii) impact on group’s revenue: _________
3
Part III: (points 0/10)
1) Calculation – what is the Working Capital Requirement in following company: (points 0/5)
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2) Question – List 3 actions that should do a CFO of a production/retail company In the context of the
actual crisis of Covid, in order to maintain a sufficient level of cash and maintain the business. (points
0/5)
(ex: Postpone/ cancel industrial and commercial investments)
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4
Corporate finance section:
1) Define NPV, PBP and IRR. (points 0/3)
Then, consider the following projects:
Project A
Project B
Project B requires an investment of € 4.500.000 and generates the following cash flows:
Answer the following questions:
a) Calculate Project A’s cash flows. (points 0/2)
b) What is the PBP on each project? (points 0/2)
c) Given that you wish to use the PBP rule with a cut-off period of 3 years, which project would
you accept? (points 0/2)
d) If k = 7%, compute the projects’ NPV. (points 0/2)
e) Choose the project that is more convenient according to the NPV. (points 0/2)
5
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6
2) Write the formula of Cash Flow to Firm and Cash Flow to Equity. Which of the two would you
use to obtain respectively Enterprise Value and Equity Value and why? (points 0/7)
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7
3) Compute the Equity Value of this firm according to the Unlevered Discounted Cash Flow
method. (points 0/10)
The WACC calculation must be performed on the basis of 2014 figures.
where: K(e) is the cost of Equity, K(d) is the cost of Debt and g is the cash flows’ annual growth
rate.
8
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9
M&A section
1) Why is EBITDA important? Why is it used as a basis for the valuation of EV (enterprise value)?
Why is it not enough to use EBITDA reported but adjusted EBITDA? (points 0/10)
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2) What are the main M&A documents and what is their content? (points 0/10)
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3) What is the brand? What are the evaluation methods of a brand? How and when are they
accounted for in the balance sheet? (points 0/10)
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