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Where do you personally draw the line with design take-home tests?

Sorry for the repost, I'm not sure why the body text wasn't delivered a while ago 😭
I'm curious where people in the design industry personally draw the line when it comes to take-home assignments.

I'm currently interviewing for a role in a small start up where the assignment asks me to:

* Create a printed merch and a website hero graphic in which they asked me to specifically use Figma and Adobe Illustrator.
* Base both deliverables on themes that (I found out by myself) actually match the CEO's existing businesses.
* Submit fully layered and editable source files for both files
* Ensure all assets are commercially usable.
* Disclose any AI, stock assets, textures, or mockups used.

To be fair, they did say rough drafts or concepts were okay, and not to spend more than 2-4 hours on the test.

Since the assignment is based on real businesses and requires editable, commercially usable assets, I'm wondering whether this is a fairly standard way to evaluate candidates or whether it's getting close to spec work.

Where do you personally draw the line? What makes you think: "This is a reasonable hiring exercise" or "This is too close to free spec work."
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