1.Which one of the following alternatives accurately represents the franchise factor (FF)?

A)   FF = Observed P/E – Base P/E.

B)   FF = (Observed P/E – Base P/E)/Growth Factor.

C)   FF = Observed P/E x Growth Factor – Base P/E.

D)   FF = [(Observed P/E)/Growth Factor] – Base P/E.

2.Which one of the following is NOT important in the determination of the franchise P/E?

A)   The present value of new growth projects relative to the current value of the firm.

B)   The expected return on new opportunities.

C)   The observed P/E.

D)   The weighted average cost of capital.

3.The two components of the franchise P/E are the:

A)   franchise factor and return factor.

B)   franchise factor and the growth factor.

C)   risk factor and return factor.

D)   risk factor and growth factor.

答案和详解如下：

1.Which one of the following alternatives accurately represents the franchise factor (FF)?

A)   FF = Observed P/E – Base P/E.

B)   FF = (Observed P/E – Base P/E)/Growth Factor.

C)   FF = Observed P/E x Growth Factor – Base P/E.

D)   FF = [(Observed P/E)/Growth Factor] – Base P/E.

The correct answer was B)

The Franchise P/E is given by: Franchise P/E = Observed P/E – Base P/E.

The Franchise P/E can also be written in terms of the franchise factor (FF) as:

Franchise P/E = FF x Growth Factor.

Putting these two equations together we get:

FF x Growth Factor = Observed P/E – Base P/E.

Which finally leads to: FF = (Observed P/E – Base P/E)/Growth Factor.

2.Which one of the following is NOT important in the determination of the franchise P/E?

A)   The present value of new growth projects relative to the current value of the firm.

B)   The expected return on new opportunities.

C)   The observed P/E.

D)   The weighted average cost of capital.

The correct answer was D)

Only the weighted average cost of capital (WACC) is not directly related to the franchise P/E. The franchise P/E is, on the other hand, related to the cost of equity since this rate serves as a benchmark against which the expected return on new opportunities is measured. Depending on the manner in which the franchise P/E is expressed, the remaining alternatives all have a role in influencing the value of the franchise P/E.

3.The two components of the franchise P/E are the:

A)   franchise factor and return factor.

B)   franchise factor and the growth factor.

C)   risk factor and return factor.

D)   risk factor and growth factor.

The correct answer was B)

The franchise P/E has two components: (1) the franchise factor, which accounts for the required return on new investments, and (2) the growth factor, which accounts for the present value of excess returns from new investments.