Random walk model to forecast earnings and free cash flow

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Reference no: EM132063939

Critically evaluate the following statement made by a quantitative buy-side analyst: “It is not worth the time to develop detailed fundamentals-based forecasts of sales growth and profit margins to make earnings projections, or cash flow components to make projections of free cash flow. One can be almost as accurate, at virtually no cost, using the random walk model to forecast earnings and free cash flow.”

Reference no: EM132063939

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