B选项不太懂

问题如下：

Nigel French, an analyst at Taurus Investment Management, is analyzing Archway Technologies, a manufacturer of luxury electronic auto equipment, at the request of his supervisor, Lukas Wright. French is asked to evaluate Archway’s profitability over the past five years relative to its two main competitors, which are located in different countries with significantly different tax structures.

French begins by assessing Archway’s competitive position within the luxury electronic auto equipment industry using Porter’s five forces framework. A summary of French’s industry analysis is presented in Exhibit 1.

French notes that for the year just ended (2019), Archway’s COGS was 30% of sales. To forecast Archway’s income statement for 2020, French assumes that all companies in the industry will experience an inflation rate of 8% on the COGS. Exhibit 2 shows French’s forecasts relating to Archway’s price and volume changes.

After putting together income statement projections for Archway, French forecasts Archway’s balance sheet items. He uses Archway’s historical efficiency ratios to forecast the company’s working capital accounts.

Based on his financial forecast for Archway, French estimates a terminal value using a valuation multiple based on the company’s average price-to-earnings multiple (P/E) over the past five years. Wright discusses with French how the terminal value estimate is sensitive to key assumptions about the company’s future prospects. Wright asks French:

“What change in the calculation of the terminal value would you make if a technological development that would adversely affect Archway was forecast to occur sometime beyond your financial forecast horizon?”

The most appropriate response to Wright’s question about the technological development is to:

选项：

A.increase the required return. B.decrease the price-to-earnings multiple. C.decrease the perpetual growth rate.

解释：

B is correct. If the future growth or profitability of a company is likely to be lower than the historical average (in this case, because of a potential technological development), then the target multiple should reflect a discount to the historical multiple to reflect this difference in growth and/or profitability. If a multiple is used to derive the terminal value of a company, the choice of the multiple should be consistent with the long-run expectations for growth and required return. French tells Wright he believes that such a technological development could have an adverse impact on Archway beyond the forecast horizon.