Question #13
Reading: Reading 19 Equity Valuation - Applications and Processes
PDF File: Reading 19 Equity Valuation - Applications and Processes.pdf
Page: 6
Status: Incorrect
Correct Answer: A
Your Answer: A
Question
A wise analyst will examine a valuation to determine:
Answer Choices:
A. ways to enhance a client's valuation
B. how well it will be received by the firm's management
C. its sensitivity to changes in expectations
Explanation
The results of valuation models can be very sensitive to changes in the expectations
incorporated in the model. Analysis of a valuation's sensitivity to the expectations and a
review of the confidence the analyst has in the expectations may lead to the use of a
valuation range rather than a pin-point value.