10. In order to get a more accurate forecast of revenue growth, an analyst shoul

Question

10. In order to get a more accurate forecast of revenue growth, an analyst should remove the effects of which of the following? Changes in currency values. m. Mergers and acquisitions. IV·Changes in accounting policies. a) I and il only. b) 1 and WI only. c)ni and only d) , Ill, and IV anly Answer- 11. The explicit forecast period must be long enough for the company to reach a steady state. Which of the following is NOT a desirable property of that steady state? a) The growth rate rises above the weighted average cost of capital. b) The company earns a constant rate of return on existing capital. c) The company earns a constant rate of return on new capital invested. d) The company reinvests a constant proportion of its operating profits into the business each year Answer a to calculate continuing value is to apply the constant growth perpetuity 12. An alternative to using the key value driver formul formula to the operating free cash flow of Calculate the next year forecast operating free cash a company. Calculate the continuing value of operations given the following assumptions flow is $80 million, annual growth in free cash flow is 2%, and the wACC is 7%. swer_

Explanation / Answer

9-

C

ROIC

10-

D

II,III and IV

11-

A

the growth rate rises above the weighted average cost of capital

12-

(forecasted cash flow)/ (WACC- growth rate)

80/(7%-2%)

1600

million

9-

C

ROIC

10-

D

II,III and IV

11-

A

the growth rate rises above the weighted average cost of capital

12-

(forecasted cash flow)/ (WACC- growth rate)

80/(7%-2%)

1600

million

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