How does Trefis account for inflation, consumer confidence, unemployment and Fed rate adjustments?
Trefis price estimates factor in inflation and fed-adjustments through our discount rate which is the company’s weighted-average cost of capital (WACC). Briefly, the WACC factors in the company’s cost of equity which is based on a long-term risk-free rate that captures inflation and the long-term effect of Fed adjustments. You can access our discount rate estimates for division within a company by clicking on the “P&L / All Forecasts” button on a company page, selecting the P&L tab and then scrolling down to select the Edit DCF link within the P&L window. Consumer confidence and unemployment are taken as factors into our forecasts where appropriate. For example, we forecast lower growth in Notebook PC sold in 2009 compared to prior years due in part to weak consumer confidence as a result of macroeconomic uncertainty. Unemployment has a more direct impact for our forecasts for payroll processors such as ADP and Paychex.
