Estimating an Industry Earnings Multiplier using Macroanalysis

Using Macroanalysis for Estimating Industry Earnings Multiplier

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Question

When using macroanalysis in estimating an industry earnings multiplier

Answers

A. you first estimate the industry growth rate (g) which is determined by the retention rate and the return on equity.

B. you examine the relationship between the multiplier for the industry and the market.

C. you first estimate the industry required rate of return (k) because this is influenced by the risk-free rate and the expected inflation rate.

D. you compute an average multiplier for the industry.

E. you examine the specific variables that influence the earnings multiplier.

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Explanations

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A. B. C. D. E.

The two alternative techniques to estimate an industry earnings multiplier aremacroanalysis, where you examine the relationship between the multiplier for the industry and the market, and microanalysis where you examine the specific variables that influence the earnings multiplier.

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