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E Patrick Assignment 2 3
E Patrick Assignment 2 3
A. SYNOPSIS
In the world of trendsetting fashion, instinct and marketing savvy are
prerequisites to success. Jordan Ellis had both. During 2012, his
international casual-wear company, Encore, rocketed to $300 million in
sales after 10 years in business. His fashion line covered the young
woman from head to toe with hats, sweaters, dresses, blouses, skirts,
pants, sweatshirts, socks, and shoes. In Manhattan, there was an
Encore shop every five or six blocks, each featuring a different color.
Some shops showed the entire line in mauve, and others featured it in
canary yellow. And so on contrary to the conservative securities
analysts, Jordan Ellis felt that the company could maintain a constant
annual growth rate in dividends per share of 6% in the future, or
possibly 8% for the next 2 years and 6% thereafter.
B. CASE VIEWPOINT
MBA STUDENT
G. CONCLUSION
Base on the computation, the book value has no relevance to the true
value of the firm. Of the remaining methods, the most conservative
estimate of value is given by the zero growth model. Wary the analyst
should advise paying no more than $25 per share.
H. RECOMMENDATION
The inverse of the P/E is the measurement of required return to the
investor, therefore, I would like to recommend that the inverse of P/E
(15.6%) and 16% for the CAPM is required return.