I have not seen these in the curriculum, however it is part of the sample questions on the CFA webpage. Anybody who knows whether it is a part of the LOS?
Anybody who has seen this?
Can you please share the URL of the sample question from that CFA webpage? The word “franchise” is not seen in the 2016 LOS.
It is on the CFA webpage on LII as sample exam questions.
I found a paragraph in CFAI curriculum about franchise P/E but honestly I don’t remember reading about it:
SS11 Equity Valuation: Industry and Company Analysis in Global context
Reading 34. Discounted Divident Valuation
Under section 4.5 (just above 4.6):
“Leibowitz and Kogelman (1990) and Leibowitz (1997) have provided elaborate analyses of the drivers of the growth component of P/E as a franchise-value approach.”
Not sure if that’s relevant.
Interesting. While the word franchise is not something that should scare us off (at first glance it seems to relate to the fact that the company in question is a global franchise) but I tracked down LOS references and there is an obvious mismatch.
For instance, answer 17 makes reference to Readings 11-37-e and 11-41-o.
In the 2016 LOS 11-37-e pertains to Residuel Income (e) explain the relation between residual income valuation and the justified price- to-book ratio based on forecasted fundamentals) and 11-41-o is non-existent.
My conclusion is these samples are quite old and are for illustration purposes only.