NO.PZ2024021802000012
问题如下：
If a company increases its ESG risk compared to its peers, the most appropriate adjustment to valuation models would be to reduce its:
选项：
A.cost of capital.
B.target P/E ratio.
C.estimated capital expenditures.
解释：
A. Incorrect because the company would have a higher cost of capital. A company’s environmental management processes and policies are judged strong or weak. After this judgment, the cost of capital used to discount cash flows in a DCF analysis is adjusted down or up by 1% to account for this (with it adjusted up if policies are judged weak). This can also be on a country- or sector-basis, where a country or sector ESG risk factor may contribute to a change in a cost of capital or terminal value growth assumption.
B. Correct because ceteris paribus, higher ESG risk should trade with a discount, such that an investor may be willing to invest in a company at a 50% premium on a PE ratio due to strong ESG characteristics.
C. Incorrect because higher ESG risk will most likely mean higher capex to solve the issues. ESG factors can lead a company to decrease or increase its future capital expenditure. A forecast ESG impairment event, e.g. a sub-standard factory, may result in an impairment charge being made to bring the company’s book value down.
不是资本成本也有关系？
