Mini case from the book - Introduction to Corporate Finance 3rdEd. pg 179 - Valuing stocks
Case - your investment adviser has sent you three analystreports for a young, growing company named Vegas Chips Inc.. Thesereports depict the company as spectulative, but each one posesdifferent projections of the company's future growth rate inearning and dividends. all three reports show that vegas chipsearned $1.20 per share in the year just ended. There is consensusthat a fair rate of return to investors for this common stock is14% and that management expects to consistently earn a 15% returnon the book value of equity (ROE = 15%).
1. Discuss the features(s) that drive the differing valuationsof vegas chips. what additional information do you need to garnerconfidence in the projections of each analyst report?
