Question 458 capital budgeting, no explanation
Which of the following is NOT a valid method to estimate future revenues or costs in a pro-forma income statement when trying to value a company?
(a) Extrapolation of past trends to estimate future revenues or costs.
(b) Using a constant or trending 'percent of sales' method to forecast future costs.
(c) Use futures (derivative) prices, if available, to forecast prices which helps calculate revenues.
(d) Use forecast GDP growth rates published by the statistics bureau to estimate future revenue growth.
(e) Assume that markets are efficient and use the random walk hypothesis to substitute a random value for revenue.