Question
Discuss the feature(s) that drives the differing valuation of Vegas Chips, Incorporated. What additional information do you need to garner confidence in the projections of
Discuss the feature(s) that drives the differing valuation of Vegas Chips, Incorporated. What additional information do you need to garner confidence in the projections of each analyst report?
All three analysts use different ways to valuate the shares; Analyst A uses a zero-growth method, analyst B uses the constant growth method or Gordon growth model, and analyst C uses variable method. The information related with the rate of return is needed, to garner confidence for the projected dividends and the discount rate (155). This is a critical piece of the puzzle. A stock that already pays a dividend, predicting what the dividend will be over the next few quarters may not be too difficult, but forecasting far out into the future is extremely challenging (155). Stocks that do not pay a dividend are seen as more difficult because the analyst has to estimate when the dividend stream will begin. This makes the discount rate or rate of return required by the market on Vegas Chips depend on the stock's risk.
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