Question

You are trying to value a firm. As a first step, you try to forecast the sales growth for next year. You determine that while overall industry sales are expected to grow at a healthy 10%, the firm's market share is expected to drop from the current level of 20% to 18%. What is the forecasted sales growth for the firm?

Group of answer choices

7.8%

-1%

10%

8%

-2%

Answer 1

Let the total industry size is 100

Total market size of the company is (100*20%)= 20

In the new scenario, The overall industry has increased 10% so the industry overall weight is now= (100*110%)= 110

Overall share of the firm in the current scenario

= (18% of 110%)= 19.8

Total forecasted sales growth of company= (current sales -total sales before growth)/current sales

= (19.8-20)/20

= -.01 or -1%

Correct answer will be option (B)-1%