You are trying to value a firm. As a first step, you try to forecast the...

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%

-2%

Solutions

Expert Solution

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%

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Suppose you are a currency speculator trying to forecast what will happen to the value of...

Suppose you are a currency speculator trying to forecast what will happen to the value of the dollar over the next year. Suppose all of our usual theories hold (uncovered, covered and real interest rate parities, absolute and relative purchasing power parities, as well as the Fisher effect for nominal interest rates). For each of the separate cases below, use the information in that case to compute the expected depreciation of the dollar , or state if there is not...

You are trying to estimate the enterprise value of Firm X. Since this firm is private,...

You are trying to estimate the enterprise value of Firm X. Since this firm is private, you cannot directly estimate the firm’s cost of equity using its stock data. Fortunately, there is a similar firm, Firm Y, which is in the same industry with comparable operating risk characteristics. Assume that the CAPM holds. The risk-free rate is 2% and the market risk premium is 5%. QUESTION 1 Firm Y has a debt-to-equity ratio of 3 and it plans to keep...

You are trying to value the stock of Cowbell Inc. You know that the firm only...

You are trying to value the stock of Cowbell Inc. You know that the firm only uses dividends to return cash to its investors and you have forecasted the dividends per share for the next 5 years (see table below). You believe that dividends will continue to grow at a constant rate of 3% each year after year 5 (in perpetuity). The cost of equity is 16%. Given this information, what is the best estimate for the share price for...

What are some of the ways a firm can try to increase the overall value of...

What are some of the ways a firm can try to increase the overall value of its technology and its likelihood of becoming the dominant design? Are dominant designs good for consumers? Competitors? Complement tors? Suppliers?

One Step, Inc., is trying to determine its cost of debt. The firm has a debt...

One Step, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 15 years to maturity that is quoted at 90 percent of face value. The issue makes semiannual payments and has a coupon rate of 4 percent. What is the company's pretax cost of debt? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) If the tax rate is 21 percent, what...

One Step, Inc., is trying to determine its cost of debt. The firm has a debt...

One Step, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 20 years to maturity that is quoted at 95 percent of face value. The issue makes semiannual payments and has a coupon rate of 9 percent. What is the company's pretax cost of debt? If the tax rate is 21 percent, what is the after tax cost of debt?

first step in calculation of net present value is to find out

The first step in testing for impairment of goodwill is to compare the fair value of...

The first step in testing for impairment of goodwill is to compare the fair value of the reporting unit with its book value, including goodwill. assess qualitative factors that indicate whether the fair value of the reporting unit is greater or less than its carrying value. measure the fair value of the reporting unit and the fair value of the identifiable assets of the reporting unit. compare the fair value of the reporting unit with its book value, excluding goodwill....

7.2 Systematic Desensitization Try it! Use what you learned about systematic desensitzation to create a step-by-step...

7.2 Systematic Desensitization Try it! Use what you learned about systematic desensitzation to create a step-by-step approach to help someone (or yourself) overcome a fear. Make up an example or use a real fear from your own experience and apply what you learned. Make sure you show that you understand the two important parts to it!!!!

What is the step by step procedure to complete a forecast analysis from an income statement?...

What is the step by step procedure to complete a forecast analysis from an income statement? How do you predict % of increase in revenue using % of sales method?

Subjects