An investment banker states, It is not worth my while to worry about detailed long-term forecasts. Instead,
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An investment banker states, “It is not worth my while to worry about detailed long-term forecasts. Instead, I use the following approach when forecasting cash flows beyond three years. I assume that revenues grow at the rate of inflation, capital expenditures are equal to depreciation, and that net profit margins and working-capital-to-revenue ratios stay constant.”
What pattern of return on equity is implied by these assumptions? Is this reasonable?
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Business Analysis And Valuation
ISBN: 978-1473758421
5th Edition
Authors: Erik Peek, Paul Healy, Krishna Palepu
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