GILBERT ENTERPRISES Tom Gil eyes as he as he read the quote about his firm in The Globe and Mail. The stock had closed a $35.25, down $3.75 for the week. He called his vice-president of finance, Jane Arnold. and they agreed to meet on Saturday morning at 9 a.m. for breakfast. bert, founder and chair of the board of Gilbert Enterprises, could not believe When Jane arrived, they reviewed the stock's performance for the past few months Although the stock opened the year (2015) at $28.50 per share, it had reached a high of $50 in March, but had steadily slid in value to its current level of $35.25 in mid-May. Tonm and Jane both thought the stock was undervalued in the marketplace and were seriou considering an announcement that the firm was going to repurchase up to one million of its own shares in the open market beginning on June 1 of 2015. They thought this would send a message to investors that the market had placed the stock at an unrealistically low level. Before taking any action, they decided to consult with their investment banking firm of Baker, Green and Roth. Roth had aided the firm in initially selling its stock to the public ("going public") five years ago, and was quite familiar with its operations. Although he was surprised to receive their call during an early Saturday morning round of golf at the country club, he promised to representative, Albert Roth, senior vice-president at the investment get back to them in the next few days with his recommendation on a stock repurchase. Gilbert Enterprises was the third-largest firm in the auto parts replacement industry specializing in brake parts, power transmissions, batteries, cables, and other products related to used automobiles. Although most of the auto industry advertising relates to flashy new cars, Albert Roth knew that the auto parts replacement industry was becoming increasingly important. His research indicated that the average age of an automobile life had reached eight p from a mere 6.8 years in the mid-2000s. Why? New vehicle price increases ed the rise in consumer income. People are forced to keep their old cars had far surpass longe more r whether they want to or not. Furthermore, environmental legislation manda emission inspections and maintenance programs. Consumers were being forc nd more money to update older automobiles to meet these standards. Gilbert Enterprises had the most advanced just-in-time (JIT) inventory management system in the industry. For that reason, Albert Roth believed the firm would enjoy bes ed. upernormal growth, beyond industry standards, for the next three years. His estimate was that a 15 percent growth rate during that time period was enti reasonable. After that time span, a more normal growth rate of 6 percent was expect Curre rate of return of 10 percent nt dividends were 1.20 per share, and he decided to use a discount or required l Budgeting Process
