- CFA Exams
- CFA Level I Exam
- Study Session 10. Equity Valuation (2)
- Reading 26. Industry and Company Analysis
- Subject 7. Long-term forecasting
CFA Practice Question
Which assumption will cause a company's shares to trade at a discount to their historical average multiple?
A. The intensity of competition is likely to increase in the future.
B. The company makes a major divestiture.
C. The company is likely to earn higher returns on invested capital in the future.
Explanation: Its profitability will likely be lower due to more intensive competition.
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