F3 Exam Dumps | Assume today is 31 December 20X1. A listed mobile phone company has just launched a new phone which is

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Question 59/185

Assume today is 31 December 20X1.
A listed mobile phone company has just launched a new phone which is proving to be a great success.
As a direct result of the product's success, earnings are forecast to increase by:
* 5% a year in each of years 20X2 - 20X6
* 3% from 20X7 onwards
Market analysts were very excited to hear the news of the success of the product and future growth forecasts.
Assuming a semi-efficient market applies, which of the following company valuation methods is likely to give the best estimate of the company's equity value today?

A. P/E valuation based on the company's long term P/E and earnings for the year ended 31 December 20X1.

B. Today's share price x number of shares in issue + retained earnings.

C. Discounted free cash flow using the company's forecast growth rates.

D. Today's share price x number of shares in issue.

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Question 59/185

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