Q: 4
Assume today is 31 December 20X1.
A listed mobile phone company has just launched a new phone which is proving to be a great
success.
As a direct result of the product's success, earnings are forecast to increase by:
• 5% a year in each of years 20X2 – 20X6
• 3% from 20X7 onwards
Market analysts were very excited to hear the news of the success of the product and future growth
forecasts.
Assuming a semi-efficient market applies, which of the following company valuation methods is
likely to give the best estimate of the company's equity value today?
Options
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