📊 NISM Series XVChapter 10 of 15⚖ 12 marks weightageCase-Based ✓
Ch.10: Valuation Principles
Practice questions for NISM-Series-XV: Research Analyst Certification Examination
(mandated by SEBI under the Research Analysts Regulations, 2014).
Chapter 10 carries 12 out of 100 marks
in the final examination. The exam has 80 MCQs + 5 case-based sets, 120-minute duration,
60% passing score, and −0.25 negative marking per wrong answer.
38
MCQ
3
Case Sets
50
Total Qs
12
Exam Marks
60%
Pass Score
−0.25
Neg. Marking
What You Will Learn in This Chapter
Apply DCF, relative valuation, and asset-based valuation methods
Understand P/E, P/B, EV/EBITDA, and other valuation multiples
Know SOTP valuation and its use in conglomerate analysis
Valuation carries 12 of the 100 marks in NISM Series XV, level with Chapter 8 and behind only Technical Analysis. Expect a mix of definitions, ratio formulas and short numerical questions. The chapter's organising idea is simple: price is what the market charges, value is what the business is worth, and the analyst's job is to compare the two so a buy, sell or hold view can be justified.
1. Price versus value, and why valuation is done
Price is observable and set by the market moment to moment. Value has to be estimated from what the business will earn and what it owns. A valuation exercise exists to decide whether a security is overpriced, underpriced or fairly priced, which is what turns analysis into a recommendation. Valuations are also needed for mergers and acquisitions, fund raising, regulatory and accounting requirements, and dispute resolution.
2. Where value comes from
A business generates value from two sources: earnings (the cash it produces from operations) and assets (what it owns and could realise). Every valuation method traces back to one or both. This is also why the ratios in this chapter divide neatly into earnings-based and asset-based families.
3. Discounted cash flow
DCF values an asset as the present value of the cash it will generate, discounted at the return investors expect. The workbook introduces it with a bond: a 9% coupon bond redeemable at ₹100,000, discounted at a 9% expected return, is worth exactly its face value — because coupon and discount rate match. If investors demand more than 9%, the bond is worth less than face value; if they demand less, it is worth more. That inverse relationship between discount rate and value is the single most testable idea in the chapter.
Equity works the same way, with dividends replacing coupons and an expected sale value replacing redemption. The difference is that for a bond both the size and the timing of cash flows are known in advance, while for equity both must be estimated — which is why DCF is powerful in principle and fragile in practice. Its output is only as good as its assumptions about growth, margins and the discount rate.
4. Earnings-based multiples
Ratio
Formula
Reads as
Dividend yield
Dividend per share ÷ current price
Cash returned relative to price paid
P/E
Current price ÷ earnings per share
Price paid per rupee of earnings
PEG
(Price ÷ EPS) ÷ growth rate
P/E adjusted for growth
EV/EBIT
Enterprise value ÷ EBIT
Capital-structure-neutral earnings multiple
EV/EBITDA
Enterprise value ÷ EBITDA
As above, before depreciation
EV/Sales
Enterprise value ÷ revenue
Fallback when profits are negative
PEG was popularised by Peter Lynch to address the fact that a high P/E can be justified by high growth. A PEG below 1 suggests a business may be undervalued, and above 1 that it is expensively priced — though Lynch himself cautioned that high growth rarely persists, so the rule of thumb should not be applied blindly.
Why enterprise value matters: EPS, and therefore P/E and PEG, are affected by how the company is funded. A controlling shareholder can change the capital structure; a retail investor cannot. So when a business is valued from an acquirer's point of view, a capital-structure-neutral ratio is more appropriate. Use EV/EBITDA for capital-intensive industries, where differing asset ages and depreciation policies distort EBIT, and EV/EBIT elsewhere. Note also that P/E, EV/EBIT and EV/EBITDA all break down when the profit figure is negative — and are misleadingly high for a company that has only just reached break-even. EV/Sales is the usual substitute.
5. Asset-based measures
Price to book value — price against the accounting value of net assets; most meaningful where assets are the business, as in banking and financials.
EV to capital employed — enterprise value against the total capital funding the business.
Net asset value — assets less liabilities, the approach used where a company is essentially a holder of assets.
6. Trading multiples, transaction multiples and SOTP
A trading multiple is drawn from how comparable listed companies currently trade. A transaction multiple comes from prices actually paid in completed deals, and typically sits higher because it includes a control premium. Sum-of-the-parts values each division of a diversified group on the measure that suits it and adds the results — appropriate when a single multiple would misrepresent businesses with very different economics.
7. Objectivity, and what to watch
Valuation is an estimate carrying the analyst's assumptions, not a fact. The same business can be valued very differently by changing the growth rate or discount rate slightly, which is why disclosure of assumptions matters and why the regulatory chapter treats valuation claims carefully. For new-age and loss-making businesses, conventional profit multiples often cannot be applied at all, and operating parameters such as users or transaction volumes are used instead — measures that are harder to verify and easier to flatter.
Written in BullWiser's own words from the NISM-Series-XV workbook (February 2026), Chapter 10. Educational content for exam preparation only; nothing here is investment advice or a recommendation on any security.
Multiple Choice Questions (38)
Q1MCQEasyPrice vs Value
According to Warren Buffett, what is the fundamental distinction between price and value in investing?
APrice is what you pay, and Value is what you get.
BPrice is determined by cash flows, and Value is set by the most panicked seller.
CPrice is an educated estimate, and Value is available from the stock market.
DPrice is based on analysis, and Value is known to all.
Q2MCQEasyValuation Principles
Valuation is often considered both an art and a science because it requires a combination of:
AMarket sentiment and historical prices.
BKnowledge, experience, and professional judgment.
CRegulatory approvals and legal precedents.
DSupply and demand dynamics.
Q3MCQHardFCFF Valuation
When using the Free Cash Flow to Firm (FCFF) model, after deriving the value of the firm, what specific items are subtracted to arrive at the value of equity for the shareholders?
AOnly interest-bearing debt.
BMinority interest, preferred share capital, and interest-bearing debt.
CSurplus cash, cash equivalents, and short-term investments.
DOperating cash flow and capital expenditure.
Q4MCQMediumValuation Approaches
Which valuation approach is generally considered unsuitable for financial investors in the stock market but may be considered by strategic investors?
ACash flow based valuation.
BSelling price-based approach.
CCost based valuation.
DRelative valuation.
Q5MCQMediumLender's Primary Consideration
In the context of lending, what does the text indicate is the primary consideration for a lender before making a loan?
AThe value of the collateral offered by the borrower.
BThe business's ability to generate cash flows to meet its obligations.
CThe historical financial performance of the borrower's industry.
DThe potential for capital appreciation of the borrower's assets.
Q6MCQEasyValuation Approaches
Which valuation approach is described as being 'generally not suitable for financial investors' but may be considered by strategic investors who intend to carry on the business long term?
ACash flow based valuation
BSelling price-based approach
CCost based valuation
DRelative valuation
Q7MCQMediumValuation Nature
Why is valuation often considered both an art and a science?
ABecause it involves both historical data analysis and future trend prediction.
BDue to the combination of knowledge, experience, and professional judgment required.
CIt relies on both quantitative formulas and qualitative market sentiment.
DIt integrates economic theories with psychological factors of investors.
Q8MCQEasyReasons for Valuation
Which of the following is NOT listed as a reason for carrying out valuations of assets/businesses/liabilities?
ABuying a business as part of an investment exercise.
BGeneral sense of value of business to owners.
CDetermining the market capitalization of a publicly traded company.
DAccounting, taxation, and other regulatory and legal requirements.
Q9MCQEasyPrice vs Value
Who is known to state frequently, “Price is what you pay and Value is what you get”?
ASeth Klarman
BWarren Buffett
CBenjamin Graham
DPhilip Fisher
Q10MCQEasyDCF Conditions
According to the text, the Discounted Cash Flow (DCF) approach to valuation is most appropriate when which three things are known with certainty?
AMarket trends, competitor analysis, and economic forecasts.
BStream of future cash flows, timings of these cash flows, and expected rate of return by the investors.
CHistorical stock prices, trading volumes, and dividend payout ratios.
DManagement's strategic vision, employee satisfaction, and operational efficiency.
Q11MCQEasySources of Value
As per Warren Buffett, what are the only two sources of value in a business?
ARevenue and Expenses.
BEarnings and Assets.
CMarket Capitalization and Book Value.
DDividends and Share Price.
Q12MCQHardIntrinsic Valuation
In intrinsic valuation, what is the key difference between Risk Neutral Valuation and Real World Valuation regarding the discount rate and cash flow adjustment?
ARisk Neutral Valuation discounts most likely cash flow at a risk-free rate, while Real World Valuation adjusts cash flows by probability and discounts at a risk premium.
BRisk Neutral Valuation adjusts cash flows by probability and discounts at a risk-free rate, while Real World Valuation estimates most likely cash flow and discounts it at a rate reflecting a risk-free rate plus a risk premium.
CRisk Neutral Valuation uses the WACC, while Real World Valuation uses the cost of equity.
DRisk Neutral Valuation is suitable for high-growth companies, while Real World Valuation is for mature companies.
Q13MCQHardDCF Models - FCFF
When calculating Free Cash Flow to Firm (FCFF) using the indirect method, which of the following items is typically ADDED BACK to EBIT * (1 – Tax rate)?
AGains on the sale of assets.
BDecrease in non-cash working capital.
CCapital Expenditure Incurred.
DInterest payments.
Q14MCQEasyDividend Discount Model
For which type of companies is the Dividend Discount Model (DDM) considered most suitable?
AHigh-growth companies that reinvest all earnings.
BCompanies that do not pay dividends.
CMatured companies in the defensive industry that pay regular and substantial dividends.
DCompanies with highly volatile and unpredictable cash flows.
Q15MCQMediumNature of Valuation
Why is valuation often considered both an 'art' and a 'science'?
ABecause it relies solely on mathematical formulas (science) and intuition (art).
BBecause there are uncertainties associated with inputs, requiring knowledge, experience, and professional judgment.
CBecause it involves both historical data analysis (science) and future market predictions (art).
DBecause it is a legal requirement (science) but also subject to individual interpretation (art).
Q16MCQHardFCFE vs. FCFF
When might an analyst prefer to use the Free Cash Flow to Firm (FCFF) model over the Free Cash Flow to Equity (FCFE) model?
AWhen the company has a very clear and objective debt policy.
BWhen the company is in a high-growth phase and does not pay dividends.
CWhen it is not possible to objectively estimate net borrowings/(repayments) due to a lack of an objective debt policy.
DWhen the primary goal is to determine the value of equity shareholders directly without considering debt.
Q17MCQEasyReasons for Valuation
Which of the following is NOT explicitly mentioned as a reason for carrying out valuations of assets/businesses/liabilities?
ABuying a business as part of an investment exercise.
BSettling personal disputes among business partners.
CMergers and Acquisitions.
DAccounting, taxation, and other regulatory and legal requirements.
Q18MCQHardFCFE vs FCFF
What is a major challenge in using the Free Cash Flow to Equity (FCFE) model, often leading analysts to prefer the Free Cash Flow to Firm (FCFF) model?
AThe difficulty in forecasting future revenue growth rates for high-growth companies.
BThe inability to objectively estimate net borrowings/(repayments) if a company lacks an objective debt policy.
CThe requirement to use the Weighted Average Cost of Capital (WACC) as the discount rate.
DThe limited applicability to companies that do not pay regular dividends.
Q19MCQMediumPurpose of Valuation
According to the text, what is the ultimate purpose of valuation, regardless of its specific objective?
ATo determine the exact market price of an asset.
BTo ensure compliance with all accounting and regulatory requirements.
CTo relate price to value and estimate if it is fairly priced, over-priced or under-priced.
DTo present multiple scenarios reflecting the effect of primary variable changes.
Q20MCQHardValuation as Art and Science
The text describes valuation as 'often considered an art as well as a science.' What combination of elements does it state is required in arriving at a fair valuation of any asset?
AMarket sentiment, economic indicators, and historical data analysis.
BQuantitative formulas, statistical modeling, and financial ratios.
CKnowledge, experience, and professional judgment.
DRegulatory compliance, legal precedents, and audit reports.
Q21MCQHardGordon Growth Model Assumption
When applying the Gordon Growth Model (perpetual growth model) for valuation, what is a key assumption regarding the relationship between the dividend growth rate (g) and the cost of equity (k)?
AThe growth rate (g) must be equal to the cost of equity (k).
BThe growth rate (g) must be higher than the cost of equity (k).
CThe growth rate (g) must be lower than the cost of equity (k).
DThe growth rate (g) has no direct relationship with the cost of equity (k).
Q22MCQEasyDCF Factors
What are the two principal factors that drive the valuation of a firm using the Discounted Cash Flow (DCF) method?
AMarket capitalization and P/E ratio.
BEstimating the expected cash flows and the determination of the rate used to discount these cash flows.
CHistorical stock prices and analyst recommendations.
DBalance sheet assets and liabilities.
Q23MCQMediumPrice vs Value Distinction
According to the provided text, what is a key distinction between 'price' and 'value' in capital markets?
APrice is determined by intrinsic analysis, while value is set by market demand.
BPrice is available from the stock market and known to all, while value is based on the valuer's evaluation and analysis.
CPrice is a long-term measure, whereas value reflects short-term market sentiment.
DPrice is always higher than value, reflecting a market premium.
Q24MCQMediumDCF Models Suitability
Which of the following Discounted Cash Flow (DCF) models is described as suitable for 'matured companies in the defensive industry' that pay regular and substantial dividends?
AFree Cash Flow to Firm (FCFF) model
BFree Cash Flow to Equity (FCFE) model
CDividend Discount Model (DDM)
DGordon Growth Model (GGM)
Q25MCQMediumValuation Approaches
Which valuation approach is described as generally 'not suitable for financial investors' in the stock market because they typically do not have a choice to build and run a company on their own?
Which of the following components is included in the calculation of Free Cash Flow to Equity (FCFE)?
ATax benefit on Interest payments.
BWeighted Average Cost of Capital (WACC).
CNet borrowings/(repayments).
DMinority interest.
Q27MCQHardFCFF Model
When using the Free Cash Flow to Firm (FCFF) model, after the firm value is estimated by discounting FCFF at WACC, how is the value of equity of the shareholders derived?
ABy adding surplus cash, cash equivalents, and short-term investments to the firm value.
BBy subtracting minority interest, preferred share capital, and interest-bearing debt from the firm value.
CBy dividing the firm value by the number of outstanding shares.
DBy only considering the operating cash flow and capital expenditure.
Q28MCQEasyPurpose of Valuation
Which of the following is explicitly mentioned as a reason for carrying out valuations of assets/businesses/liabilities?
ATo determine the market sentiment of a stock.
BTo speculate on short-term price movements.
CTo comply with accounting, taxation, and other regulatory requirements.
DTo assist in day trading decisions.
Q29MCQMediumDCF Appropriateness
The Discounted Cash Flow (DCF) approach to valuation is considered most appropriate when three specific pieces of information are known with certainty. Which of the following is NOT one of them?
AThe stream of future cash flows.
BThe timings of these cash flows.
CThe historical volatility of the asset's price.
DThe expected rate of return by the investors (discount rate).
Q30MCQHardIntrinsic Valuation
Within the intrinsic valuation approach, how does 'Risk neutral valuation' differ from 'Real world valuation'?
ARisk neutral valuation discounts at a risk-free rate after adjusting cash flows by probability, while Real world valuation discounts at risk-free rate plus a risk premium for most likely cash flows.
BRisk neutral valuation uses market multiples, while Real world valuation uses discounted cash flows.
CRisk neutral valuation is suitable for mature companies, while Real world valuation is for high-growth companies.
DRisk neutral valuation considers only assets, while Real world valuation considers both assets and liabilities.
Q31MCQHardIntrinsic Valuation
In the context of intrinsic valuation, what is the primary distinction between 'risk neutral valuation' and 'real world valuation'?
ARisk neutral valuation is used for real assets, while real world valuation is for financial assets.
BRisk neutral valuation adjusts cash flows by the probability of realising them and discounts at a risk-free rate, whereas real world valuation estimates the most likely cash flow and discounts at a rate reflecting a risk premium.
CRisk neutral valuation ignores market volatility, while real world valuation incorporates it.
DRisk neutral valuation is for short-term assets, while real world valuation is for long-term assets.
Q32MCQEasyNeed for Valuations
Which of the following is NOT listed as a reason for carrying out valuations of assets/businesses/liabilities?
ABuying a business as part of an investment exercise.
BGeneral sense of value of business to owners.
CPersonal financial planning for employees.
DMergers and Acquisitions.
Q33MCQMediumDDM and FCFE Application
Which of the following statements correctly identifies the most suitable application for the Dividend Discount Model (DDM) versus the Free Cash Flow to Equity (FCFE) model?
ADDM is suitable for high-growth companies, while FCFE is for companies that pay regular dividends.
BDDM is suitable for companies that pay regular and substantial dividends, while FCFE is an alternative for companies that do not pay dividends or reinvest heavily.
CDDM is used when debt policy is arbitrary, while FCFE is used when debt policy is objective.
DDDM uses WACC as the discount rate, while FCFE uses the cost of equity.
Q34MCQEasyReasons for Valuation
Which of the following is NOT explicitly mentioned as a reason for carrying out valuations of assets/businesses/liabilities in the provided text?
ABuying a business as part of an investment exercise
BMarketing and advertising budget allocation
CMergers and Acquisitions
DAccounting, taxation and other regulatory and legal requirements
Q35MCQMediumIntrinsic Valuation
In the context of intrinsic valuation, which approach involves adjusting cash flows by the probability of realizing them and then discounting at a risk-free rate?
AReal world valuation
BRisk neutral valuation
CRelative valuation
DCost based valuation
Q36MCQMediumDCF Models - FCFE
What is one of the primary problems that the Free Cash Flow to Equity (FCFE) model addresses, making it an alternative to the Dividend Discount Model (DDM)?
AIts inability to account for terminal value.
BIts suitability for companies that pay regular and substantial dividends.
CIts applicability to companies that do not pay dividends or pay insubstantial dividends.
DIts reliance on historical dividend growth rates.
Q37MCQEasyNeed for Valuations
Which of the following is NOT explicitly mentioned as a reason for carrying out valuations of assets/businesses/liabilities?
ABuying a business as part of investment exercise.
BSelling a business as part of investment exercise.
CDetermining the market sentiment for a particular stock.
DMergers and Acquisitions.
Q38MCQMediumPrice vs. Value
Mr. Seth Klarman states that in capital markets, price is set by the most panicked seller. How is value determined according to his statement?
ABy the prevailing interest rates in the economy.
BBy the evaluation and analysis of the valuer.
CBy cash flows and assets.
DBy the average price of similar assets in the market.
Case-Based Questions (3 sets)
Case 1Case-BasedBusiness Valuation for Growth Companies
TechInnovate Solutions, a fast-growing software company, has recently completed its Series B funding round and is now contemplating its next strategic move: either acquiring a smaller competitor to expand its market share or preparing for a potential IPO in the next 3-5 years. The company currently generates strong operating cash flows but reinvests a significant portion back into R&D and market expansion, resulting in no dividend payments to its equity holders. Its capital structure includes a moderate level of debt, which management adjusts periodically based on strategic needs rather than a fixed target. Analysts are tasked with providing a robust valuation to guide these strategic decisions and attract further investment. The market for similar tech companies is highly dynamic, with valuations often reflecting future growth potential rather than immediate profitability. Given TechInnovate's growth trajectory and capital allocation strategy, selecting the most appropriate valuation methodology is crucial for an accurate assessment.
Medium Sub-question 1
Given that TechInnovate Solutions does not pay dividends and its debt policy is not fixed, which specific discounted cash flow (DCF) model would likely be the most robust and objective for valuing the firm?
ADividend Discount Model (DDM).
BFree Cash Flow to Equity (FCFE) model, assuming a constant growth rate.
CFree Cash Flow to Firm (FCFF) model, discounted by the Weighted Average Cost of Capital (WACC).
DGordon Growth Model, by adjusting for non-dividend payments.
Medium Sub-question 2
Considering TechInnovate's characteristics as a fast-growing company with future growth potential, which valuation approach would generally be most appropriate for financial investors?
ACost-based valuation, focusing on the historical cost of creating its software.
BIntrinsic valuation (Cash flow based valuation), discounting its projected future cash flows.
CSelling price-based approach (Relative valuation), solely comparing its current P/E ratio to mature, dividend-paying companies.
DLiquidation value, based on the immediate sale of all its tangible assets.
Easy Sub-question 3
What is the primary reason for TechInnovate Solutions to undertake a business valuation at this stage?
ATo determine the precise market price of its shares for daily trading.
BTo satisfy immediate regulatory compliance for tax purposes.
CTo guide strategic decisions like acquisitions or IPO preparation and attract investment.
DTo calculate the historical cost of its assets for balance sheet reporting.
Hard Sub-question 4
When applying an appropriate DCF model for TechInnovate, what critical consideration should analysts account for, especially given its 'fast-growing' nature and reinvestment strategy?
AAssuming a constant, stable growth rate for cash flows from the very first year.
BValuing the company in two stages: a high-growth phase and a stable-growth (terminal) phase.
CFocusing solely on current year's earnings as the primary valuation metric.
DUsing a risk-free rate as the discount rate due to its strong operating cash flows.
Case 2Case-BasedValuation Models for Different Company Profiles
Ms. Anya Sharma, a seasoned Research Analyst at 'Alpha Insights,' is tasked with valuing two distinct companies for her institutional client. The first, 'Evergreen Utilities Ltd.' (EUL), is a well-established power distribution company known for its consistent dividend payouts and stable, predictable cash flows. EUL operates in a highly regulated industry, ensuring steady revenue streams and limited cyclicality. Its dividend policy has been stable for over a decade, with a modest, consistent growth rate. The second company, 'InnovateTech Solutions Inc.' (ITS), is a rapidly growing software-as-a-service (SaaS) provider. ITS is currently reinvesting nearly all of its substantial earnings back into aggressive expansion and product development, and consequently, it does not pay dividends. Its growth trajectory is expected to be exceptionally high for the next five to seven years, after which its growth is projected to stabilize to an industry average. Ms. Sharma needs to recommend the most appropriate valuation methodology for each company, considering their unique financial characteristics and growth profiles, to provide a fair assessment of their intrinsic value and advise her client on potential investment opportunities.
Easy Sub-question 1
Ms. Sharma is comparing EUL's current market price of ₹250 per share against her calculated intrinsic value of ₹280 per share. Based on this, what conclusion can she primarily draw?
AEUL is over-priced.
BEUL is fairly priced.
CEUL is under-priced.
DThe valuation model used is incorrect.
Medium Sub-question 2
For InnovateTech Solutions Inc. (ITS), given its high growth phase and non-dividend paying nature, which valuation approach would be most suitable?
AGordon Growth Model
BTwo-stage Free Cash Flow to Equity (FCFE) Model
CPrice-to-Earnings (P/E) Ratio
DAsset-based Valuation
Hard Sub-question 3
If Ms. Sharma decides to use the Two-stage FCFE model for ITS, what critical assumption must she make regarding the growth rate in the terminal value calculation using the Gordon Growth Model component?
AThe perpetual growth rate must be higher than the cost of equity.
BThe perpetual growth rate must be equal to the risk-free rate.
CThe perpetual growth rate must be lower than the cost of equity.
DThe perpetual growth rate can be higher or lower than the cost of equity, depending on market conditions.
Medium Sub-question 4
Which valuation model would be most appropriate for valuing Evergreen Utilities Ltd. (EUL) given its characteristics?
ADividend Discount Model (DDM)
BTwo-stage Free Cash Flow to Equity (FCFE) Model
CFree Cash Flow to Firm (FCFF) Model
DCost-based Valuation
Case 3Case-BasedValuation for Mergers & Acquisitions and Asset Creation
Mr. Rajeev Kumar, a portfolio manager at 'Global Equities,' is evaluating 'AquaPure Innovations Ltd.,' a leading water purification technology company. AquaPure is currently negotiating a potential acquisition of 'HydroFlow Solutions,' a smaller competitor that possesses significant patent-protected intellectual property but also carries a substantial amount of debt. Mr. Kumar's primary objective is to determine a fair value for HydroFlow to advise AquaPure on a reasonable acquisition price, ensuring strategic alignment and financial prudence. HydroFlow has a historically fluctuating capital structure, with considerable changes in its debt levels over the past few years, making it challenging to objectively estimate future net borrowings. Furthermore, Mr. Kumar aims to understand the overall business value of HydroFlow before dissecting the impact of its specific financing arrangements. Separately, he is also tasked with a preliminary assessment of a new state-of-the-art manufacturing plant AquaPure plans to construct from scratch, for which he is considering a cost-based valuation approach.
Medium Sub-question 1
For valuing HydroFlow Solutions, given its fluctuating capital structure and the difficulty in estimating net borrowings, which DCF model would be most appropriate for Mr. Kumar to use?
ADividend Discount Model (DDM)
BFree Cash Flow to Equity (FCFE) Model
CFree Cash Flow to Firm (FCFF) Model
DGordon Growth Model
Hard Sub-question 2
When using the chosen DCF model for HydroFlow (FCFF), what discount rate should Mr. Kumar primarily use?
ACost of Equity (Ke)
BRisk-free Rate
CWeighted Average Cost of Capital (WACC)
DCost of Debt (Kd)
Easy Sub-question 3
Mr. Kumar is also considering a preliminary assessment of a new manufacturing plant AquaPure plans to build from scratch. Which valuation approach is generally suitable for evaluating the cost of creating such an asset?
ASelling price-based approach
BCash flow based valuation (intrinsic)
CCost-based valuation
DRelative valuation
Medium Sub-question 4
After calculating the value of HydroFlow using the FCFF model, how would Mr. Kumar derive the value of equity for HydroFlow's shareholders?
AAdd total debt to the firm value.
BSubtract total debt and preferred share capital from the firm value.
CSubtract only preferred share capital from the firm value.
DDivide the firm value by the number of outstanding shares.
About this content: These practice questions are based on the
NISM-Series-XV: Research Analyst Certification Examination Workbook (February 2026)
published by the National Institute of Securities Markets (NISM), Mumbai.
NISM is a SEBI-established institution. Questions cover Valuation Principles with verified answers and explanations.
BullWiser is an independent exam preparation platform — not affiliated with NISM or SEBI.
Last updated: .
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