Final Review

Created by David Moore, PhD

Study Tips

• Go over the Rivian, Docusign, Silk, Gentex, Stitch Fix, and Yeti examples
• Practice problems and homeworks for extra work and more miscellaneous topics
• Your final project is good practice (two birds with one stone)
• Focus on intuition and process, not just getting the right answer
• Practice saying answers out loud
• Start big picture and work to small details
• Focus on your problem areas and start early

What a Strong Answer Sounds Like

• Start with a clear, direct answer to the question
• Then walk through your reasoning step-by-step
• Use intuition to explain the “why” behind your answer
• Bring in examples or connect to other concepts
• Pause and check if you should go deeper
• Stay calm and adjust if given a follow-up question

Common Mistakes in Oral Exams

• Jumping straight to an answer without explaining your reasoning
• Memorizing scripts instead of understanding concepts
• Not answering the actual question being asked
• Stopping too early instead of fully developing your answer
• Panicking when challenged instead of thinking it through
• Failing to connect ideas across topics

How You Are Evaluated

• Do you answer the question directly?
• Do you explain your reasoning clearly?
• Do you demonstrate intuition and the “why” behind your answer?
• Can you handle follow-up questions?
• Depth of understanding matters more than memorization

Oral Exam Tips

• Take your time responding
• If you are unsure, start with what you know for sure and build outward
• It is okay to take a few moments before responding
• Try to structure your response and create a roadmap for the answer
• Keep answers concise but complete
• Arrive to the room early
• Do not make claims you know are false just to fill silence

Why Oral Exams Are Valuable

• Allow you to demonstrate depth of understanding, not just final answers
• Give you a chance to clarify and recover from incomplete responses
• Better reflect how knowledge is used in real-world settings
• Provide immediate feedback on your performance
• Reward understanding of the “why,” not just memorization

Skills You Build (That Actually Matter)

• Thinking on your feet under pressure
• Explaining complex ideas clearly and concisely
• Structuring answers in real time
• Handling follow-up questions and challenges
• Communicating like you would in a job interview
• Building confidence in high-stakes conversations

Evidence — Why Oral Exams Work

• ~80% of students report oral exams encourage deeper learning than written exams
• 99% say preparing for the oral exam improved their understanding
• 78% say oral exams allow them to express knowledge better
• Students report stronger long-term retention of material
• Most students feel oral exams are fair and reflect real understanding
• Oral exams shift studying from memorization to true understanding

What Students Actually Say

• “If you can’t explain it simply, you don’t understand it well enough.”
• “I had to truly understand the material, not just memorize it.”
• “Explaining it out loud showed me what I didn’t know.”
• “It forced me to think through the ‘why,’ not just the answer.”
• “This felt like real interview preparation.”
• “I still use this way of learning on the job.”

Why This Matters for Your Career

• Most of your career will involve explaining ideas, not taking written tests
• Interviews test how well you think and communicate in real time
• You will need to defend your assumptions, not just present answers
• Clear communication often matters as much as technical skill
• Oral exams simulate real-world pressure in a low-stakes setting
• Students consistently report using these skills in interviews and jobs

Bottom Line

• Oral exams are not just about grading — they are about skill-building
• They force you to truly understand the material
• They prepare you for interviews and real-world communication
• The students who embrace the format benefit the most

Oral Exam Structure

• 5 question categories
1. Accounting (40 points)
2. Financial Statement Analysis (40 points)
3. DCF (120 points: two-part question, 100 + 20)
4. Relative Valuation (60 points)
5. Summary (20 points)
• 280 total points
• 30–45 minutes to complete

Lifeline

You have one lifeline to replace a question (cannot be used for DCF Part 1, RV, or Summary).

Use it strategically: swap when you recognize a weak area early.

Example Question

How does an intrinsic valuation deal with the infinite horizon problem?

Excellent Answer Part 1 (100%)

Notice the structure: Answer → Process → Why → Extend

In a DCF we address the fact that the firm is assumed to continue in perpetuity by calculating a terminal value, i.e. an estimate of the value of the firm at the end of the forecast window. We have two standard ways of estimating a terminal value: 1) Perpetuity growth and 2) Exit multiple.

Excellent Answer Part 2

Under the first method we continue an intrinsic approach and simply calculate the present value of expected future cash flows assuming a stable growth rate in perpetuity and continue to discount using the appropriate discount rate (WACC if UCF). We employ a perpetuity growth formula of CF/(r-g). This approach requires an assumption of the stable growth rate that is usually bounded by the risk-free rate and overall growth rate of the economy (historically 2-5%) and that the growth rate does not exceed the discount rate.

Excellent Answer Part 3

Under the second approach we deviate from the intrinsic philosophy of focusing on cash flows and essentially use a relative (or comps) valuation. It is common to use an EV/EBITDA exit multiple, where an industry peer average is used in conjunction with the estimated operating metric, in this case EBITDA, from the terminal year of the forecast window. Under either approach it is important that the firm has reached stable growth at this point in its life cycle, and the estimated value then needs to be discounted back, since it sits in the terminal year, to the valuation date.

Bare Minimum Answer (70–80%)

(while still discussing terminal values and not saying anything incorrect)

There are two terminal value calculations. The first one is CF/(r-g) and the second one is EV/EBITDA times EBITDA. We estimate the inputs using our model. The first approach is called perpetuity growth and the second approach is called exit multiple. They are both good methods and can be used in an intrinsic valuation.

Incorrect or Lacking Response (<70%)

A response not hitting the bare minimum criteria or containing incorrect statements will result in a lower grade than bare minimum.

What You Need to Know for the Exam

Key Concepts

1. Basic Excel (not on Oral Exam)
2. Financial Statements Review
3. Financial Statement Analysis
4. Discounted Cash Flow Valuation (Module 4-6)
5. Relative Valuation
6. Model Selection and Football Field Chart
7. Advanced Excel (not on Oral Exam)

Final Tips

• Get a good night of sleep
• Take your time responding
• Take a deep breath if you get nervous
• Do not be afraid to ask for clarification
• Have fun — this is your chance to show me everything you have learned this semester

If you can explain it clearly, you understand it. That’s the goal.

Thanks for being a great class and giving your best effort!!!

Basic Excel Modeling

• Must know standard formatting
• Other skills that will come up in modeling:
• References
• TVM functions
• Statistical functions
• Logical functions
• Lookup functions

Financial Statement Review

• Accounting basics (assumptions, principles, and constraints)
• Financial reporting
• Financial statements
• What they are
• Items or accounts
• Go from transactions to completed financial statements
• How a transaction flows through statements
• Issues

Financial Statement Analysis

• Common-size
• Why, how, what?
• Ratio analysis
• Know what the ratios mean (4 main groups)
• Dupont Identity
• Need to be able to interpret
• Benchmarking
• Issues?

DCF Valuation: Cash Flows

• Unlevered Cash Flows or FCFF
• Calculate and understand
• Forecasting
• How to? What to forecast? What determines the forecast?
• Internal consistency
• Lookup functions applied here

Good Review: PP, Gentex, Alaska Airlines, Stitch Fix, SILK and Yeti Valuation
Excel Videos: #1: GNTX, #2: SFIX, #3: Alaska (alt. template), #6 PP, #7 SILK and Yeti
Lecture Videos: #1-#4

DCF Valuation: Discount Rate

• Terminal Value
• Perpetuity growth vs Exit Multiple
• Cost of Capital (WACC)
• Cost of Equity
• Cost of Debt
• Capital Structure Weights
• Know how to estimate and calculate using all methods
• Enterprise Value

DCF Valuation: Diluted Shares and Loose Ends

• Equity compensation and shares outstanding
• Treasury Stock, with a twist, and Option Drag
• Restricted Stock
• Mid-year discounting, cross holdings, estimating MV of debt, dual class stock
• Levered Free Cash Flows (FCFE)
• Sensitivity Analysis
• What makes a good valuation?
• Will not be tested on premium/discount cash

Relative Valuation: Multiples

• What is it?
• Steps
• Know issues and value drivers of multiples
• LTM calculation
• Transaction Comps
• Excess Cash (not tested)

Model Selection and Football Field Chart

• Intrinsic vs Relative Valuation
• Definition, assumptions, pros/cons, application, when to use
• Pricing and Value/Price Gap
• Football Field Chart
• Investment Recommendation

Advanced Excel

• Pivot Table
• Sort and Filter
• Conditional Formatting
• Using Charts
• Concatenate/INDIRECT
• Text Functions
• Goal Seek