Series 79 Practice Questions (2026) — Free Sample Questions with Answers

Answer: B

1. Industrial EV = 100 × 10.0 = 1,000; Consumer EV = 50 × 6.0 = 300.
2. Corporate costs = −10 × 8.0 = −80.
3. SOTP EV = 1,000 + 300 − 80 = 1,220.
4. Equity = 1,220 − 420 = 800; per share = 800 / 40 = $20.00.

$17.50: Wrong. This applies a single blended 8.0x multiple to total EBITDA (140 × 8.0 − 420) / 40.

$20.00: Correct. EV = 100 × 10 + 50 × 6 − 10 × 8 = 1,000 + 300 − 80 = 1,220; equity = 1,220 − 420 = 800; per share = 800 / 40 = $20.00.

$22.00: Wrong. This leaves out the capitalized corporate costs ((1,300 − 420) / 40).

$30.50: Wrong. This divides enterprise value by shares without subtracting net debt.

SOTP values each segment at its own multiple, deducts capitalized corporate costs, then bridges to equity per share.

Answer: A

1. PV of cash flows = 100 × 0.909 + 110 × 0.826 + 120 × 0.751 = 90.90 + 90.86 + 90.12 = 271.88.
2. PV of terminal value = 1,500 × 0.751 = 1,126.50.
3. EV = 271.88 + 1,126.50 = 1,398.38 ≈ $1,398 million.

$1,398 million: Correct. PV of cash flows = 90.9 + 90.9 + 90.1 = 271.9; PV of TV = 1,500 × 0.751 = 1,126.5; EV = $1,398 million.

$1,457 million: Wrong. This discounts the terminal value but adds the annual cash flows undiscounted (330 + 1,126.5).

$1,511 million: Wrong. This discounts the year-3 terminal value with the year-2 factor (1,500 × 0.826).

$1,772 million: Wrong. This adds the terminal value undiscounted.

DCF EV = sum of discounted UFCF + terminal value discounted with the final-year factor.

Answer: B

1. DSO = 90 / 730 × 365 = 45 days.
2. DIO = 72 / 438 × 365 = 60 days.
3. DPO = 42 / 438 × 365 = 35 days.
4. CCC = DSO + DIO − DPO = 45 + 60 − 35 = 70 days.

50 days: Wrong. This subtracts DSO and adds DPO (60 − 45 + 35), reversing both signs.

70 days: Correct. DSO 45 + DIO 60 − DPO 35 = 70 days.

105 days: Wrong. This is DSO + DIO only; it omits the payables offset.

140 days: Wrong. This adds DPO instead of subtracting it.

Cash conversion cycle = DSO + DIO − DPO; inventory and payables days use COGS, receivable days use revenue.

Answer: C

1. Tranche 1 is in the money: proceeds = 6 × $20 = $120 million.
2. Shares repurchased = 120 / 30 = 4 million; net new shares = 6 − 4 = 2 million.
3. Tranche 2 ($40 strike > $30 price) is antidilutive and excluded.
4. Diluted shares = 50 + 2 = 52 million; diluted EPS = 104 / 52 = $2.00.

$1.79: Wrong. 104 / 58 adds every option gross, including the out-of-the-money tranche, with no buyback.

$1.86: Wrong. 104 / 56 adds tranche 1 gross and skips the treasury stock buyback.

$2.00: Correct. Tranche 1: proceeds 6 × 20 = 120 buy back 120 / 30 = 4 shares, a net 2 million new shares; tranche 2 is out of the money and excluded. Diluted shares = 52; EPS = 104 / 52 = $2.00.

$2.08: Wrong. 104 / 50 is basic EPS.

Treasury stock method: add in-the-money options less shares bought back with the exercise proceeds; exclude out-of-the-money options.

Answer: D

Post the data to the main data room for all bidders equally: Wrong. Equal treatment does not justify exposing competitively sensitive data to competitors; this raises antitrust and business risk.

Decline, since a competitor may never receive pricing data: Wrong. Too absolute; sensitive data can be shared with safeguards when needed for a final bid.

Give it to the bidder's business-unit head under an amended NDA: Wrong. An NDA does not prevent operating personnel from using competitor pricing; the information still reaches the wrong people.

Release it late in the process to a restricted clean-team folder: Correct. Sensitive data goes to a clean team (outside advisers or non-operating staff) in a restricted folder, timed to the final round, often aggregated or anonymized.

Competitively sensitive data for strategic bidders is staged late and shared only with a clean team through restricted data-room access.

Answer: C

1. Rule 13d-3(d)(1): shares the holder may acquire within 60 days are treated as outstanding for that holder only.
2. Numerator = 4,600,000 + 600,000 = 5,200,000 shares.
3. Denominator = 100,000,000 + 600,000 = 100,600,000 shares.
4. Ownership = 5,200,000 / 100,600,000 = 5.17%, so a Schedule 13D or 13G filing is triggered.

4.60%: Wrong. This ignores the warrants; shares the holder can acquire within 60 days count as beneficially owned.

4.95%: Wrong. This adds all 5,000,000 outstanding warrants to the denominator; only the holder's own exercisable warrants are added.

5.17%: Correct. Rule 13d-3(d)(1): add Clearwell's 600,000 warrant shares to both the numerator and the denominator: 5,200,000 / 100,600,000 = 5.17%, above the 5% filing threshold.

5.20%: Wrong. This adds the warrant shares to the numerator but not to the denominator.

For beneficial ownership, add the holder's own exercisable rights to both numerator and denominator, but not other holders' rights.

Answer: B

Rule 506(b), with a signed accredited-investor questionnaire from each buyer: Wrong exemption. General solicitation is not permitted under Rule 506(b), so the website and podcast rule it out.

Rule 506(c), with reasonable steps to verify each buyer is accredited: Correct. Rule 506(c) permits general solicitation if all purchasers are accredited and the issuer takes reasonable steps to verify their status; a self-certification alone is not verification. Form D is due within 15 days after the first sale.

Rule 504, with a Form D filed within 15 days after the first sale: Wrong limit. Rule 504 is capped at $10 million in 12 months, well below $40 million.

Section 4(a)(2), with sales to no more than 35 non-accredited buyers: Wrong exemption. A publicly solicited offering is not a private offering under Section 4(a)(2), and the 35-purchaser limit belongs to Rule 506(b).

General solicitation means Rule 506(c): all purchasers accredited and reasonable verification. Rule 506(b) bars general solicitation but allows up to 35 non-accredited, sophisticated purchasers.

Answer: D

1. Identify restricted persons: broker-dealer employee (restricted), portfolio manager (restricted), parent materially supported by a broker-dealer employee (restricted).
2. Sum: $3.0M + $2.0M + $1.5M = $6.5M.
3. Percentage: $6.5M ÷ $50M = 13%.
4. Compare with the de minimis limit: 13% > 10%, so restricted persons must be carved out of the new issue.

6%; it may buy, since restricted persons hold 10% or less: Persons omitted. This counts only the broker-dealer employee; portfolio managers and materially supported immediate family members are also restricted persons.

9%; it may buy, since restricted persons hold 10% or less: Person omitted. This leaves out the portfolio manager, who is a restricted person under Rule 5130.

10%; it may buy, since restricted persons hold 10% or less: Person omitted. This leaves out the father, an immediate family member materially supported by a broker-dealer employee, who is restricted.

13%; it may buy only with restricted interests carved out: Correct. Restricted interests total $3.0M + $2.0M + $1.5M = $6.5M, and $6.5M ÷ $50M = 13%. That exceeds the 10% de minimis limit, so the fund may participate only if restricted persons are excluded from the new-issue allocation.

Rule 5130: an account may buy new issues if restricted persons hold 10% or less of its beneficial interests; above that, restricted persons must be carved out.

Answer: C

I and III: Wrong. I is an initiation of coverage, which Rule 139 excludes from the issuer-specific safe harbor; III fails the Rule 139 industry-report condition that the issuer get no materially greater space or prominence.

I and IV: Partly wrong. IV is protected, but I is an initiation of coverage, which is outside Rule 139.

II and IV: Correct. II is an issuer-specific report published in the regular course on an S-3-eligible issuer, which Rule 139 protects. IV is a Rule 138 report: research on the issuer's non-convertible debt while the firm distributes only its common stock.

III and IV: Partly wrong. IV qualifies, but an industry report that gives the issuer materially greater prominence does not satisfy Rule 139.

Rule 139 covers regular-course issuer reports (not initiations) on S-3-eligible issuers and balanced industry reports; Rule 138 covers research on a different class (common vs non-convertible debt or preferred) than the one being offered.

Answer: D

Nothing, because the 10% ownership threshold is not met: Wrong test. 10% ownership is one route to a conflict; directing at least 5% of net proceeds to the member or its affiliates is a separate route, and 7% meets it.

Prominent disclosure only, since the conflict stems from proceeds: Step omitted. A proceeds conflict needs a QIU too, unless an exception applies; none applies to an unrated IPO with a conflicted sole manager.

A QIU only, as the QIU replaces any prospectus disclosure: Step omitted. A QIU does not replace disclosure; prominent disclosure of the conflict is always required.

Prominent disclosure plus a qualified independent underwriter: Correct. Under Rule 5121, at least 5% of net proceeds going to the member or its affiliates is a conflict of interest. Prominent disclosure is required, and a QIU is needed because the sole manager is conflicted, there is no bona fide public market and the stock is not investment grade.

Rule 5121 conflict = 10% ownership/control or at least 5% of net proceeds to the member or its affiliates; always disclose prominently, and add a QIU unless an unconflicted lead manager, a bona fide public market or an investment grade rating applies.

Answer: C

1. Secured recovery = collateral value = $240M; deficiency claim = $300M − $240M = $60M (unsecured).
2. Value left for unsecured creditors = $420M − $240M = $180M.
3. Unsecured pool = notes $250M + trade $50M + deficiency $60M = $360M.
4. Recovery = $180M ÷ $360M = 50%; preferred and common receive nothing.

40%: Wrong secured treatment. This pays the term loan in full ($300 million), leaving $120M ÷ $300M; the loan is secured only up to its $240 million of collateral.

45%: Wrong priority. This adds the preferred stock to the unsecured pool ($180M ÷ $400M); preferred ranks below all creditors.

50%: Correct. The term loan takes $240M from its collateral, and its $60M deficiency joins the unsecured class. Remaining value of $420M − $240M = $180M is shared by $250M + $50M + $60M = $360M of unsecured claims, so recovery is 50%.

60%: Deficiency claim omitted. $180M ÷ $300M leaves out the term loan's $60M unsecured deficiency claim.

Absolute priority: secured claims up to collateral value, the deficiency becomes unsecured, then unsecured claims pro rata, then preferred, then common.

Answer: D

No violation, since the friend owes no duty to Nash or Yorkton: Wrong. Rule 14e-3 does not require a breach of fiduciary duty; trading on material nonpublic information about the offer obtained from the adviser is enough.

Only the associate violated the rule, by passing the tip: Incomplete. Rule 14e-3(d) bars the tip, and Rule 14e-3(a) separately bars the friend's purchase.

No violation, since the offer had not yet commenced: Wrong timing. The rule applies once substantial steps toward the offer have been taken, before commencement.

Both the tip and the friend's purchase violate the rule: Correct. Once substantial steps are taken, Rule 14e-3(a) bars anyone holding MNPI about the offer obtained from the bidder, the target or their advisers from trading, and 14e-3(d) bars the adviser's people from tipping, with no duty or benefit required.

Rule 14e-3: after substantial steps toward a tender offer, anyone with MNPI from the bidder, the target or their agents may not trade or tip, without any fiduciary-duty requirement.

Answer: C

1. Offer value per target share = exchange ratio × acquirer price = 0.80 × $55.00 = $44.00.
2. Premium = (offer value − unaffected price) ÷ unaffected price.
3. ($44.00 − $35.20) ÷ $35.20 = $8.80 ÷ $35.20 = 0.25 = 25.0%.

10.0%: Wrong base. This measures the $44.00 offer value against the rumor-inflated $40.00 price, not the unaffected price.

20.0%: Wrong denominator. ($44.00 − $35.20) ÷ $44.00 divides by the offer value instead of the unaffected price.

25.0%: Correct. Offer value = 0.80 × $55.00 = $44.00 per Quentin share. Premium = ($44.00 − $35.20) ÷ $35.20 = 25.0%.

95.3%: Ratio inverted. $55.00 ÷ 0.80 = $68.75 treats the ratio as Rookwood shares per Quentin share in reverse.

Offer value = exchange ratio × acquirer share price; measure the premium against the unaffected price, before rumors or leaks.