Question 1: What is the benefit of a short-term performance forecast? How might a manager combine the benefits of both short-term and long-term performance forecasts to develop a more accurate value forecast?
Question 2: Identify the strengths and weaknesses of the Enterprise DCF, Economic Profit, and Multiples approaches to estimating continuing value.
Question 3: What should a company consider when estimating the value of employee stock options? Identify the main factors that impact the value of employee stock options.
Question 4: Why is the continuing value estimate a less reliable forecast than the near-term (explicit) forecast?
Question 5: List some economic fundamentals that could affect a company's forecast.
Question 6: How would inflation affect the determination of the WACC, assuming significant inflation?
Question 7: What is the danger of looking back in history and using a constant 4 percent inflation rate in forecasting future financial performance?
Question 8: How would the presence of substantial discontinuities (lumpiness) make forecasting of fixed capital needs more complex?
Question 9: Discuss the continuing value model and the assumptions it makes.
Question 10: Why do is business valuation as an "art" rather than a "science"?