Which of the following is a reason why valuation multiples may be less effective?

Valuation multiples are often used in corporate finance to assess the value of a company by comparing it to similar entities. However, when there is no clear guidance for adjustments based on differences among companies, this can significantly reduce the effectiveness of these multiples.

Each company can have unique characteristics such as differing capital structures, growth rates, and risk profiles, which may require adjustments to the multiples to accurately reflect their true value. Without a standardized approach to making these adjustments, relying solely on valuations derived from multiples can lead to misleading conclusions. Investors may mistakenly assume that companies are directly comparable when they are not, thereby skewing the valuation.

The other options, while they may have their own implications, do not directly address the fundamental issue of how unique differences among companies can impede the effective use of valuation multiples. Transaction costs affect the feasibility of executing transactions but don't inherently relate to the valuation multiples themselves. The constant nature of interest rates speaks more to the economic environment and might influence valuations indirectly but does not pertain to multiple comparisons directly. Finally, while financial models can be complex, they do not negate the effectiveness of multiples; rather, they can complement or provide a deeper analysis when making adjustments for valuation comparisons.