CIMAPRA19-F03-1 Exam - Topic 6 Question 125 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 125
Topic #: 6

[All CIMAPRA19-F03-1 Questions]

Assume today is 31 December 20X1.

A listed mobile phone company has just launched a new phone which is proving to be a great success.

As a direct result of the product's success, earnings are forecast to increase by:

* 5% a year in each of years 20X2 -- 20X6

* 3% from 20X7 onwards

Market analysts were very excited to hear the news of the success of the product and future growth forecasts.

Assuming a semi-efficient market applies, which of the following company valuation methods is likely to give the best estimate of the company's equity value today?

AToday's share price x number of shares in issue + retained earnings.

BToday's share price x number of shares in issue.

CDiscounted free cash flow using the company's forecast growth rates.

DP/E valuation based on the company's long term P/E and earnings for the year ended 31 December 20X1.

Show Suggested Answer

Suggested Answer: B

by Casie at May 13, 2026, 02:08 PM

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Lemuel

16 days ago

I remember we discussed how discounted cash flow is often the best method for valuing companies with growth forecasts, but I'm not entirely sure if it applies here.

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