CFA Level I · CFA Level I Exam · Financial Statement Forecasting in Equity Valuation
An analyst forecasts that industry sales will be €40.0 billion next year. The company holds a 12% market share today and the analyst expects it to gain 1.5 percentage points. The company's forecast revenue is closest to:
The forecast revenue is about €5.4 billion. Market share rises from 12% to 13.5% after the 1.5 percentage point gain, and 13.5% of €40.0 billion industry sales equals €5.4 billion. Using the current 12% share would give €4.8 billion.
- A€4.8 billion
- B€5.4 billionCorrect
- C€5.8 billion
Explanation
Expected share = 12% + 1.5% = 13.5%. Revenue = 0.135 × €40.0 billion = €5.4 billion. The €4.8 billion option ignores the share gain (0.12 × 40), and the €5.8 billion option wrongly treats the gain as 2.5 points.
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