Encore International In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success. Jordan Ellis had both. During 2015, his internal 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. Encore had made it. The company's hierarchal growth was to spectacular that no one could have predicted it. However, securities analysis spectacular that Encore could not keep up the pace. They warned that competition is fierce in the fashion industry and that the firm might encounter little or no growth in the future. They estimated that stockholders also should expect no growth m future dividends. Contrary to the conservative securities analysis, Joedan Ellis believed that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or possibly 8% for next 2 year and 6% thereafter. Ellis based his estimates on an established long-term expansion pan into European and Latin American markets. Veneering into three markets was expected to cause the risk of the firm, at measured by the risk premium on its stock, to increase immediately from 8.8% to 10%. Currently, the risk-free rate is 6%. In preparing the long-term financial plan, Encore's chief financial officer has assigned a junior financial analysis, Marc Scott, to evaluate the firm's current stock price. He has asked Marc to consider the conservation of the securities analysis and the aggressive predictions of the company founder, Jordan Ellis, Marc has compiled the following 2015 financial dots to has analysis. TO DO What is the firm's current book value per share? What is the firm's current PYE ratio? What is the current required return for Encore stock? What will be the new required return for Encore stock assuming that the firm expands into European and Latin American markets as planned? If the securities analysis are correct and there is so growth in future dividends, what will be the value per share of the Encore stock? If Jordan Ellis's predictions are correct, what will be the value per share of Encore stock if the firm maintains a constant annual 6% growth rate in future dividends? If Jordan Ellis's predictions are correct, what will be the value per share of Encore stock if the firm maintains a consistent annual 8% growth rate in dividends per share over the next 2 years and 6% thereafter? Compare the current [2015] price of the stock and the value found in parts a, d, and e. Discuss why these values may differ, Which valuation method do you believe most clearly represents the true value of the Encore stock? Encore International In the world of trendsetting fashion, instinct and marketing savvy are prerequisites to success. Jordan Ellis had both. During 2015, his internal 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. Encore had made it. The company's hierarchal growth was to spectacular that no one could have predicted it. However, securities analysis spectacular that Encore could not keep up the pace. They warned that competition is fierce in the fashion industry and that the firm might encounter little or no growth in the future. They estimated that stockholders also should expect no growth m future dividends. Contrary to the conservative securities analysis, Joedan Ellis believed that the company could maintain a constant annual growth rate in dividends per share of 6% in the future, or possibly 8% for next 2 year and 6% thereafter. Ellis based his estimates on an established long-term expansion pan into European and Latin American markets. Veneering into three markets was expected to cause the risk of the firm, at measured by the risk premium on its stock, to increase immediately from 8.8% to 10%. Currently, the risk-free rate is 6%. In preparing the long-term financial plan, Encore's chief financial officer has assigned a junior financial analysis, Marc Scott, to evaluate the firm's current stock price. He has asked Marc to consider the conservation of the securities analysis and the aggressive predictions of the company founder, Jordan Ellis, Marc has compiled the following 2015 financial dots to has analysis. TO DO What is the firm's current book value per share? What is the firm's current PYE ratio? What is the current required return for Encore stock? What will be the new required return for Encore stock assuming that the firm expands into European and Latin American markets as planned? If the securities analysis are correct and there is so growth in future dividends, what will be the value per share of the Encore stock? If Jordan Ellis's predictions are correct, what will be the value per share of Encore stock if the firm maintains a constant annual 6% growth rate in future dividends? If Jordan Ellis's predictions are correct, what will be the value per share of Encore stock if the firm maintains a consistent annual 8% growth rate in dividends per share over the next 2 years and 6% thereafter? Compare the current [2015] price of the stock and the value found in parts a, d, and e. Discuss why these values may differ, Which valuation method do you believe most clearly represents the true value of the Encore stock