CFA Level I · CFA Level I Exam · Introduction to Equity Valuation
An analyst forecasts that industry sales next year will be 8,000 million euros and that Lindqvist AB's market share will rise from 12.0% to 12.5%. Lindqvist's forecast revenue, in millions of euros, is closest to:
Forecast revenue equals industry sales multiplied by the expected market share: 8,000 million times 12.5% gives 1,000 million euros. Using the current 12.0% share would give 960 million and ignores the forecast gain in share.
- A960
- B1,000Correct
- C1,040
Explanation
Revenue = 8,000 x 12.5% = 1,000 million. Using the old 12.0% share gives 960, which ignores the share gain. 1,040 would need a 13.0% share.
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