Describe how analyst projections of cyclical company profits compare to actual performance. What are the possible reasons for the deviation?
Answer to relevant QuestionsWhat are some of the common features of the 2007–2009 stock market crash and previous market crashes—for example, Japan’s in the 1990s or the Internet bubble around the turn of the millennium? How much cash flow risk should a company take on? How should it manage risks with extreme outcomes that could potentially bankrupt the company but are very unlikely to occur? What are the potential reasons why TRS over short periods of time may not reflect the actual performance of a company and its management? Why should a scenario approach to valuation be used to value cyclical companies? If a bank increases its maturity mismatch, what happens to its economic spread before taxes and its economic spread after taxes (i.e., including the tax penalty)?
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