Describe the five-step approach to combining nominal and real forecasts.
Answer to relevant QuestionsAssume that inflation unexpectedly increases by 10 percent. Explain why a company’s ROIC then needs to increase by more than 10 percent to preserve its shareholder value. Are there conditions under which you should consider using a local market risk premium and a local beta estimate for a valuation rather than a global risk premium and beta? Under what circumstances should a manager apply a standard NPV approach, a DTA approach, or an ROV approach to valuation? What is the importance of purchasing power parity when you are trying to establish value for a company located in an emerging market? Why do most young, high-growth companies have negative earnings?
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