Question #132
Reading: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples
PDF File: Reading 22 Market-Based Valuation - Price and Enterprise Value Multiples.pdf
Page: 47
Status: Unattempted
Correct Answer: A
Question
An analyst begins an equity analysis of Company A by estimating future cash flows, discounting them back to the present, and dividing the result by the outstanding number of shares. This analyst is most likely using the:
Answer Choices:
A. the method of forecasted fundamentals
B. the method of comparables
C. technical analysis
Explanation
This analysis is comparing forecasted discounted cash flows (DCF) to a fundamental
variable (shares). This suggests the method for forecasted fundamentals.